Case Study: Hospital Products Ltd V. United States Surgical Corp.

It is essential for all companies to have directors. As defined in s201A(1), proprietary companies need to have only one director whereas public companies must have at least three directors as stated in s201A(2). A company consists of two important components or organs which are the board of directors and the members in general meeting. In Section 9, a director of a company is defined as “a person who is appointed to the position of the director or alternate director regardless of the name given to their position” . Under Section 9 as well, the term ‘officer’ includes a director, secretary and certain people selected to insolvent corporations which they can not only make or take part in making decisions that bring certain impact, but also have
Directors owe various fiduciary duties to the company as they have a fiduciary relationship with the company they are working at. An example of a case will be Hospital Products Ltd v United States Surgical Corp , which explained that a significant feature of a fiduciary relationship was that the fiduciary agrees to act on behalf in another party’s interests. At common law, directors are required to act in good faith in the best interests of the company, exercise their powers for a proper purpose, retain their discretionary powers, exercise a reasonable degree of care and diligence and to avoid undisclosed conflicts of interest . The statutory duties of the directors can also be found in s180, s181, s182 and s183. Applying the law to the current problem, Bill and the former executives of Solartec has breached a few of their fiduciary duties. Firstly, they have failed to exercise a reasonable care and diligence as at common law, they are expected to do so when making decisions on behalf of the company . This duty has been stated in Section 180(1) of the Corporations Act as well. For example, Bill and the executives are not being reliable to Solartec as an informal dinner was held among themselves to discuss about the purchasing of Aussie Solar. The duty of directors to exercise reasonable care and diligence can be shown in the case of Daniels v Anderson , where the main issue is whether AWA’s board had discharged its duty of care and it was held by the court that DH&S had been careless, however, it has been agreed that there was contributory negligence by AWA’s board, thus the directors in this case were negligent because they did not guide and monitor AWA properly. Furthermore, the purchasing of Aussie Solar by the director and officers of Solartec did not bring any potential benefits to the company, thus Bill has breached his