公司法：董事义务和诉讼

Advice

Answer for question (1)

(i)Harris must take into account following factors in order to take an action against James and Patrick:

1.As directors, Harris, James and Patrick own several duties to the company. Firstly,

a director owns a fiduciary duty to the company; he must behave for the best benefits of the company and should not seek any personal interests1. If there is any personal interest, the director must disclose the interest to all other directors2. For James and Patrick there were personal interests in the transaction between the accounting firm, as a partnership owned by James and Patrick, and the company, since partnership is not a separate legal person and James and Patrick severely and jointly undertake and repay its obligations, liabilities and debts; thus James and Patrick must disclose the personal interests to Harris. As a director Harris is entitled to get known about the financial conditions of the company and be kept update. The payment of large “managing fees” should be disclosed to Harris, call meeting to discuss and determine the matter3.

2.As directors, Harris, James and Patrick should avoid any conflict of interests, that is, if there is conflict between the company’s interest and director’s personal interests, the director must avoid such transaction. Therefore James and Patrick should not avoid transaction between the company and the accounting firm.

3.Since Harris had resigned from the position of director, he may only sue James and Patrick from the status as a shareholder.

(ii)He should bring the personal action under the general law due to the lack of reliefs in the Corporations Act. Although the Corporations Act has lots of provisions regarding liabilities even penalties on directors, it has no provisions dealing with the special situation in the case: Harris had resigned from the position of director, he is not director anymore, and he cannot perform his liabilities and duties as a director anymore, although he was reluctant. He can only claim against James and Patrick from the position of a shareholder.

(iii)Harris may seek following remedies:

(1)Request the company to pay dividends; as a shareholder of the company, being

paid dividends as returns of his investment is a basic right of a shareholder. for the company had developed very well for the last two years, there is no reasons that the company should refuse to pay dividends. Harris may sue James and Patrick for getting paid dividends.

(2)If the request of paying dividends is refused, he may ask that his shares being sold

to other shareholders, and if refused, persons who are not a shareholder to the company (other shareholders’ consent should be obtained, if there is shareholder that does not agree the sale then the shareholder must buy the share).

(3)Harris may announce that he was reluctant to resign from the position of director

and resign should be invalid. Harris is still a director of the company. Harris was 1Erlanger v New Sombrero Phosphate Co (1878) 3 App Cas 1218

2S. 191, the Corporations Act 2001

3s.295(4), the Corporations Act 2001