This assignment is going to present avoiding conflict of interest between corporation and personal interest of the director. Rex as a Director is required to serve the company’s needs, in addition to their own vested interest. This task is going to discuss that issues and remedies related to avoiding a conflict of interest. Where there is a disagreement, the Director has a responsibility to give priority to the company’s needs. In compliance with the rules of the corporation Act, the director will also be required to report « material personal interests ». There may usually be a conflict of interest, where the personal interests of a director clash with the company’s interests. This includes conflicts, current or potential. Therefore, the opportunities are endless. Below are just a few examples of conflicts of interest for directors:
Does Rex Owe Duties of Avoiding conflict of interest
As a director Rex has directly affected the capacity of organization to produce best and unique product being director of the organization. He also makes false statement about the product capacity of earning profit in future. Rex is liable to civil and criminal prosecution and other penalties under common rule, since it breaches his responsibility instead of avoiding a conflict of interest.
A same type of conflict of interest was seen In a recent court decision in RBC Investor Services Australia Nominees Pty Limited against Brickworks Limited  FCA 756, the Australian Federal Court considered among other things how conflicts of interest of management can impair their productive and legitimate business decision-making and can lead to company behavior becoming coercive against shareholders (Duties).
If the Director concerned earned economic benefits or not or whether harm was done to the company is relevant or irrelevant. If there was a conflict of interest when the statute, contract or agreement was entered into is necessary to be properly decided.
Under s 191 of the Act, if a material personal interest arises, the director is obliged to notify other directors. Again, the Act does not define what a ‘material personal interest’ is, but is usually taken to mean a matter of ‘some real substance’ which has the power to affect the vote of the Board. McGellin v Mount King Mining NL (1998) 144 FLR 228.
The Director shall provide information of the existence and depth of his interest in the topic. All information should be given at a meeting of the directors and after the directors are aware of the dispute as soon as possible.
The obligation to avoid conflicts of interest is drawn both from Statutory provision and general law in the Corporation Act ( the Act), which outlines a director’s conditions to avoid conflicts of interests.
One of the most important facets of the Rex’s responsibility to avoid conflicts of interest is that a director who works sincerely and who can’t make any profit can also be in violation of his responsibility under certain situations.
The essence of the statutory and general duties is mainly the role of the Rex for the good of the company and the responsibility of the director to avoid a personal benefit over corporation.
Nature of Duties of avoiding conflict of interest and breach
The Federal Court of Australia considered to what degree conflicts of interest between Directors can impair their successful and lawful business decision-making. Conflicts of interest of the Rex as director of the company are generally considered inconsistent. They subject the organization and the management to job infringement allegations and shareholder injustice.
Rex lacks to owe the duties of conflict of interest, instead of company he has worked for his personal benefit, conflict of the interest was not avoided. Under general law a person is bounded to work for, to whom he or she receive salary for his or her commitment. Statutory law clearly defines the limits and obligations of the director’s workers for organizations. Rex was not a person who owe the duties to avoid the conflict of interest. As rex was a director, he has received his salary, attended meeting as director and appointed as task handler and commitment to Dr Cooper.
Incorporation management ‘s legal responsibilities under the Corporation Act 2001 (Cth) (The Act) (Sheenan & Fenwick, 2008), which specifically forbid directors from: This rational provision, and the common law responsibility of directors to prevent and take advantage of conflicts of responsibility and interest, to ensure personal benefit.
Rex could be charged for following misconduct
• Rex did not act in good conscience or for a legitimate reason in the best interests of the company: section 181 of the Act.
• Using its influence for either the good of or to harm the company for itself or a third party: Section 182 of the Act.
• Rex used the details obtained as a director unfairly to achieve a benefit or inflict damage to the company: section 183 of the Act.
Duty not to make personal benefit: keeping an office requires the employee to be discreet with details with which an unscrupulous director may make profit. The obligation that a director has to stop exploiting their position in order to achieve advantage is important because of the valued role that a director occupies. In the case a director uses information obtained from his job to abuse corporate funds for personal benefit, the courts may regard the proceeds solely as the profits of the business, not the director (Hanrahan, Ramsay, & Stapledon, 2013).
Moreover, Rex’s responsibility not to produce income requires the advantage of harmful means, same as the recognition of bribery or fees, in exchange for a favor.
Company contracts: having a director as part of another corporation is not an inherently rare phenomenon and no legislation will prohibit a director from carrying out such a job. It arises as the boss enters into a deal with another organization of which he or she is a participant that difficulties occur.
In the most recent case, the Australian Security and Investment Commission (ASIC) considered treatment and conscientious duties of conflict of interest of directors under section 180(1) of the Corporation Act (No 8)  of the Australian Securities and Investment Commission (ASIC) (No. 8). 2001 (Cth) (Society Law)
Issues with duties to avoid conflicts of interest
Directors must not put themselves in a situation where there is an actual conflict, or a real possibility of conflict, between their obligations to the company and a personal interest or responsibility owed elsewhere (for example, to another company). It is not necessary for the company to suffer any disadvantage or the director to gain some advantage in order for this obligation to be violated. As mentioned below, the precise extent of the obligation and the actions taken to deter a violation will be determined by the business constitution. The organization shall be made aware of a general obligation due to the essence of the position of the director or any task.
Misuse of position or information
Overlapping the previous general law, managers have a constitutional obligation not, by virtue of their status, to misuses their roles or knowledge received, either to profit themselves or to cause harm to an organization. This action is “improper” if it contravenes the behaviour norms that a person in the role of the principal would fairly expect to see, whether or not the director deems it unsuitable. The requirement not to abuse company data which extend to non-confidential records. A general responsibility of trust shall also extend to classified information.
Appropriation of corporate opportunities
A director shall not allocate or redirect an advantage to another entity that is deemed, abused, or fairly assumed to be an interest in, by the company. If the manager breaks this provision, he or she is responsible for the benefit made by the contractor, even though the deal was acceptable to the company, or it was impractical for him to take advantage of the opportunity himself or to make the benefit involved (Harris, Hargovan, & Adams, 2018).
Dealing with the company
The obligation to deter conflicts of interest may be broken if the management enters into a contract or another contractual arrangement or is a director of two companies that have a common business interest or have a personal interest in a different transaction. If the manager violates the responsibility (for example in the case of non-compliance with transparency and other requirements), the business may be entitled to prohibit a sale and the manager is responsible for the cost or compensation that he or she causes with the director.
Interest of the company: Directors should use their right to be in the business, not for warranties reasons, in their judgement-not as the court claims [Ray Smith & Faset]. Interest in the Company [If solved], The interest of the corporation as a separate legal body is identical to the interest of the “business as a whole.”
The court need to performs an examination in the light of S180(1) to ascertain whether the Director has exercised his roles in the execution of his tasks with an appropriate degree of concern and diligence. The court claimed that the test procedure takes all factors into account including the company’s risk of failure, the magnitude of the failure, the possible gain of the director’s actions, and the weight of all measures taken to minimize the company’s loss against not adopting flask for wine.
Rex was responsible for avoiding conflict of interest between his job and the corporation they operate. However, conflicts between corporations are not unusual. Directors should remember their role in a conflict and consider the issue in the future.
Another means that you will become a director is to make the company suffer a damage upon duty of conflict of interest as a consequence of your violation of duties.
You may infringe upon the civil or criminal provisions of the corporation Act 2001 and you would be obliged to pay the company for its loss under these situations.
Companies are faced with significant under statuary law and general law regulations imposing fines on corporate infringements groups. Responsibility may emerge directly due to particular wrongs or to the person’s status or function of not avoiding conflict of interest, a derivative responsibility.
It shows the lack of continuity of derivative liability between Australian jurisdictions and offers alternatives for a model structure that promotes compliance and decreases the expense of adherence by reducing the need for firms to comply with multiple conditions and acts related to avoiding conflict of interest of organization.
It offers a “responsible officer contingent liability arrangement” that allows a corporation to appoint a duty officer who is required to demonstrate that he has taken all necessary steps to ensure the company fulfills its contractual responsibilities in compliance with the balance of risk but Rex did not performed which was requirement of the company, instead he save the plan for personal benefit that raised duty related to conflict of interest.
Rex is deemed to be in violation of its duty will be disciplined civilly or criminally. A statutory offence happens when a director violates what is laid out in s 184 of the act, either recklessly or with deliberate dishonesty.
Because of the high statutory burden of evidence requirement, however, legal litigation can be sought by the corporation and can be asserted for damages under common law, fair pay, rescission of contract, constructive trusts and injunctions.
A significant activity to avoid a conflict of interest is to explain that courts ought to be alert to directors’ abilities to fulfill their trust duties, such as Rich v ASIC.
If your duties as a Director are not fulfilled, you can:
• Up to $200,000, or up to five years’ imprisonment or worse, be convicted of a criminal offense;
• Judicial forfeiture clause has been broken (and the court may make you pay up to $ 200,000 to the Commonwealth)
• to cover for any injury or failure sustained by the company or others
• The management of a company shall be prohibited.
The board members found guilty of wrongdoing can from a legal point of view be liable to fines, court charges and imprisonment or jail sentences. The resignation of the Board Chair will also lead to dubious financial activities. Boards may even terminate the duties of another director or order him to give up where there is an accusation of abominable behavior (Baxt, 2005).
The image of the Company is also concerned, not just the supposed Head of the Board is hurting. Around one third are being prosecuted for company damages, criminal audits, creditor or state court actions, fraud or protest mobilization by shareholders.
While boards are constantly forced to be autonomous and diverse due to new regulatory issues, most boards remain cohesive and viewed as a team. It is commonplace for board members to build partnerships and fellowships, but it is not permitted to interfere with their company.
Good ties with the Board members will make it impossible to apologize to others for unethical conduct, unwise decisions and other issues concerning the company and its shareholders. The members of the company should never surpass the best interests of those they represent. If a board chair performs poorly, on a broader scale, the other board members and the hierarchy of the company are still represented.
It can be challenging, however, where complaints of wrongdoing occur, to review the facts and assume a constructive role by the other board members and to convey the findings to the shareholders and the media, where applicable or acceptable. In addition to coping with controversies and debacles directly, the owners and the people will still be controlling the executive board ‘s thorough treatment of those problems.
Here one thing to consider, most of the things related to the case of rex are verbal commitments and consents. No written approvements was made, no written record was there about deal between Dr cooper and Rex but only report of Rex on case. Other employees and directors against Rex could be a valid source for fighting the case but it must need to be proved in court.
In relation to claims for abuse of authority and deliberate violation of common law, the laws of market appraisal (discriminated) provide a “safe harbor” for directors. Trust good faith-Which requires the managing director to behave in good conscience, including the prevention of conflict of interest and the transparency and handling of controversy, for the best interests and correct intentions of the company. Is. Is. There are allegiance and trust duties defined as general legislation and responsibilities under the Corporation Act 2001. There duties are the duties of confidence and allegiance.
• Baxt, R. (2005). Duties and responsibilities of directors and officers: AICD.
• Duties, F. Directors’ and Officers’ Duties.
• Hanrahan, P. F., Ramsay, I., & Stapledon, G. P. (2013). Commercial applications of company law. COMMERCIAL APPLICATIONS OF COMPANY LAW, CCH Australia Ltd.
• Harris, J., Hargovan, A., & Adams, M. (2018). Australian corporate law: LexisNexis Buttwerworths.
• Sheenan, K., & Fenwick, C. (2008). Seven: The Corporations Act 2001 (Cth), corporate governance and termination payments to senior employees. Melb. UL Rev., 32, 199.
Assignment on Conflict Management