It has been commented by L.S. Sealy, a noted commentator, that directors' fiduciary duties are a creation of the nineteenth century English law and cannot cope with the complexities of the modern corporate world:
‘……they are not adequate to deal with inactive or incompetent directors or with those, who take irresponsible business risks…..’
In the wake of the recent corporate collapses, whether the existing legal framework is adequate in regulating the conduct of corporate officers, and in particular, directors, has been a matter of great concern to the policy makers and the public generally.
In this Report, the common law and the principal statutory provision governing directors' duties, S.232 of the Corporations Law which has come into effect on the 1st January 1991 will be examined. The aspects of the law which are unclear or inadequate will be highlighted and suggestions for reform in the law- in this area will be referred to, if applicable. In addition, the following policy issues related to directors' duties will be discussed:
1) Apart from owing a duty to the shareholders, whether an independent duty should be imposed on directors to other stakeholders such as creditors, employees, consumers and the community in general;
2) In respect of the duty to exercise the power of issuing shares for the proper purposes, whether directors should be allowed to initiate defensive measures against current or imminent takeovers in the first place;
3) In respect of the duty to avoid conflict of interests, how wide should be the scope of corporate opportunities which directors are to be disallowed from exploiting; and
4) Whether the directors' standard of care and skill, a subjective one under the existing law, should be an objective one.