Melbourne Law School - Theses

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Start date: 1990 × End date: 1999 × Subject: Legal status, laws, etc × Author: Worthington, Sarah ×

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    Directors' duties, creditors' rights and shareholder intervention
    Worthington, Sarah ( 1991)
    The time is ripe for a critical analysis of the scope of directors' duties, the role of shareholder intervention and the ability of company creditors to obtain remedies. Company directors are now the object of intense public scrutiny. Popular sentiment, law reform bodies and the judiciary all appear to favour expanding the duties owed by directors and increasing the ability of minority shareholders and company creditors to complain of breaches. Before any reforms are introduced, the existing law needs to be reassessed: it may already be capable of meeting the proposed demands. This thesis puts forward the view that no change to the existing law is necessary. It proposes a new analysis of the existing law to provide a logical legal framework for determining standing to sue, appropriate remedies and the effectiveness of shareholder intervention. This analysis suggests that shareholders and company creditors have greater rights than was previously thought: for this reason the existing law is adequate to meet the increased demands proposed. The absence of an adequate analytical framework in this area of the law is most evident in the debates concerning both directors' duties to creditors and the role of directors in company takeovers. The former are analyzed in detail in this thesis, but the same analysis is equally applicable to the latter. The analytical framework proposed to remedy this deficiency requires that a simple but fundamental distinction be drawn between directors' duties to act for proper purposes and directors' duties of loyalty to the company. The consequences of such a simple distinction are far-reaching: different remedies, different possibilities for shareholder intervention and different classes of possible complainants are appropriate for breaches of the different duties. It is these consequences which give the proposed analytical framework its value.