The Legal Standard of Loyalty and Professional Guidelines

Abstract

In his keynote address to the annual conference of the Insolvency Practitioners Association of Australia (IPAA), October 2006, Justice Austin reviews the law concerning the fiduciary duties of external administrators, especially voluntary administrators appointed under Part 5.3A of the Corporations Act 2001 (Cth). He relates the fiduciary idea to the concepts of loyalty, independence and impartiality, concluding that the proposition that an administrator is a fiduciary is fundamental to the nature and functions of the administrator's office. He reviews the statutory contexts in which, in Australia, issues are likely to arise about the administrator's fiduciary duty, drawing on some practical illustrations from the cases. He notes particularly the constraints on a proposed administrator in dealing with the directors of a company prior to his or her appointment. He reviews the current professional standards proclaimed by the IPAA and suggests some improvements. He proposes professional conduct rules drafted in the same fashion as the Principles of Good Corporate Governance and Best Practice Recommendations adopted by the Corporate Governance Council of the Australian Stock Exchange.

Keywords: Corporations, insolvency, voluntary administration, duties of independence and impartiality of administrator, administrator's fiduciary duty, fiduciary duty in dealing with directors prior to appointment, professional conduct guidelines, suggested approaches to drafting

JEL Classification: K22, K40, K20