Directors' Duty to Act in the Interests of the Company: Subjective or Objective?

Journal of Business Law, 2015, Issue No. 2, pp. 173-182

U of Melbourne Legal Studies Research Paper No. 730

10 Pages Posted: 8 Mar 2015 Last revised: 4 Mar 2016

See all articles by Rosemary Teele Langford

Rosemary Teele Langford

University of Melbourne - Law School

Ian Ramsay

Melbourne Law School - University of Melbourne

Date Written: March 7, 2015

Abstract

A duty to act in good faith in the interests of the company has been imposed for many years on company directors by English and Australian corporate law, as well as the corporate laws of other countries. Yet an issue that is unresolved in some countries is whether the duty is subjective, objective, or a combination of both. Courts have adopted different tests. The authors examine the relevant judgments and argue that the preferred approach combines both subjective and objective tests. Another issue on which courts have differed is whether, if a director fails to give consideration to the interests of the company, the director is necessarily in breach of the duty to act in the interests of the company. The authors analyse the judgments on this issue and conclude that there should be a breach of duty.

Suggested Citation

Langford, Rosemary Teele and Ramsay, Ian, Directors' Duty to Act in the Interests of the Company: Subjective or Objective? (March 7, 2015). Journal of Business Law, 2015, Issue No. 2, pp. 173-182, U of Melbourne Legal Studies Research Paper No. 730, Available at SSRN: https://ssrn.com/abstract=2575009

Rosemary Teele Langford

University of Melbourne - Law School ( email )

University Square
185 Pelham Street, Carlton
Victoria, Victoria 3010
Australia

Ian Ramsay (Contact Author)

Melbourne Law School - University of Melbourne ( email )

University Square
185 Pelham Street, Carlton
Victoria, Victoria 3010
Australia
+61 3 8344 5332 (Phone)

HOME PAGE: http://law.unimelb.edu.au/about/staff/ian-ramsay

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