Page 3446 - Week 09 - Thursday, 21 August 2008
Next page . . . . Previous page . . . . Speeches . . . . Contents . . . . Debates(HTML) . . . . PDF . . . .
A company is managed by its board of directors. Directors are obliged to act in the best interests of the company. There is extensive law developed over many years to support this proposition, now embodied in the duties of directors set out in the Corporations Act … Directors cannot act in accordance with any other allegiance (for example on the direction of a person who has nominated them as a director) unless that action may reasonably be regarded as being in the best interests of the company.
The relationship between the shareholders of a company and a company is determined by the company’s constitution. In the absence of an express provision to the contrary, the shareholders owe no duty to the company and may indeed act entirely in their own interest when, for example, voting on resolutions at the annual general meeting.
Some constitutions give shareholders special rights of approval of certain matters. There has been some “fine tuning” of these principles …
Shareholders have no proper role in the management of a company and indeed for them to do so may lead them to be construed as “directors” under the definition contained in the Corporations Act and thereby subject to the duties and responsibilities thereby attaching. This is commonly known as a “shadow director”. Accordingly, it is always important that there be a clear delineation between the role of the shareholder and that of the directors as managers of the company.
The Territory-owned Corporations Act … does not alter the fundamental obligations of directors, nor the legal capacity and role of a shareholder. The TOC Act provides additional governance and reporting mechanisms and makes clear the unique role of the voting shareholders as both ministers and shareholders of the company. The TOC Act provides, amongst other things, for the voting shareholders to give a direction to the company in relation to particular matters or policies and the Territory must meet the costs incurred by the company in complying with that direction. Directions under the TOC Act are rare. Indeed, they are properly to be regarded as a “last resort” in the absence of agreement by that company that, for example, complying with a particular government policy will necessarily be in the company’s best interest.
The voting shareholders hold their shares in Territory-owned corporations as trustees for the Territory. The voting shareholders are entitled (and indeed obliged) to exercise such powers as they may have in the Territory’s best interests. They may request … to adopt a certain course of action. It may be that the Territory’s interests will coincide with those of the company, but if not, no … criticism may be made—
I will repeat that: “no criticism may be made”—
of voting shareholders for acting in the Territory’s interests in priority to those of the company.
In the event that the directors of the company decide that a course of action or a policy is not in the best interest of the company the TOC Act provides for a direction to be given by the voting shareholders and directors, by complying with that direction, will not be regarded as breaching their duties to the company. Any detriment to the company is met by the obligation on the Territory to meet the cost …
Next page . . . . Previous page . . . . Speeches . . . . Contents . . . . Debates(HTML) . . . . PDF . . . .