Maria Del Pilar Bernal
0457
Assessment 3
Corporate governance obligations for companies and directors under the Corporations Act
2001
Corporate governance is a driver of the performance of a company. The term 'corporate governance'
is broad and has many components.
This section of the website sets out ASIC's view on various aspects of corporate governance,
including any regulatory guidance we have issued. It includes general information on obligations of
company directors and officers as well as information that may be of interest to other governance
professionals such as risk and compliance officers.
The Corporations Act 2001 (Cth) requires that a company director or other officer exercise their
powers and discharge their duties with care and diligence [s 180]. This duty is subject to a business
judgment rule that requires a director making a business judgment to:
Make the judgment in good faith and for a proper purpose;
Not to have a material personal interest in the subject matter of the judgment;
Inform themselves about the subject matter of the judgment to the extent they reasonably
believe to be appropriate;
Rationally believe that the judgment is in the best interests of the corporation.
In addition, directors and other officers of companies must exercise their powers and discharge their
duties in good faith in the best interests of the corporation and for a proper purpose [s 181]. They are
prohibited from improperly using their position to gain an advantage for themselves or someone else
or to cause detriment to the corporation [s 182] and are prohibited from using information obtained as
a consequence of their role with the company to gain an advantage for themselves or someone else
or to cause detriment to the corporation [s 183]. These last two provisions also apply to employees of
the company.
All of the provisions give rise to civil obligations. They are also civil penalty provisions. In a case
where a court determines that a civil penalty provision has been contravened, it must make a
declaration to that effect and may order the person pay the Commonwealth a pecuniary penalty of up
to $200,000 and may order the person compensate the company for any loss as a result of the
contravention [Part 9.4B]. The court may also disqualify the person from managing corporations for a
period the court considers appropriate [206C].
The Corporations Act 2001 (Cth) also sets out criminal offences where a director or other officer acts
recklessly or is intentionally dishonest in their failure to exercise their powers and discharge their
duties in good faith and in the best interests of the company or for a proper purpose. Similarly,
criminal offences are created where a person recklessly or intentionally dishonestly misuses their
position or information they have gained through their position with the company [184].
Directors have a duty to make full and frank disclosure of information within their knowledge to enable
shareholders to make properly informed judgments on any matter [191].
Potential breaches that may occur (based on the case example and analyses)
To determine the most common breaches of occupational health and safety (OHS) practices, you only
have to look at the most common causes of injury in Australian workplaces every year.
The fact that these injuries are still occurring means that breaches are also occurring, whether
committed by employees failing to follow OHS procedures, or employers not taking adequate
preventative measures.
, According to Safe Work Australia, key Workplace Health and Safety (WHS) statistics Australia 2018
shows the most common cause of work-related fatalities is from vehicle collision and the industries
where most fatalities occur are agriculture, forestry and fishing, transport, postal and warehousing.
The most common injuries that occur in Australian workplaces are:
Body Stressing (Overexertion). The leading cause of workplace injury in Australia. It includes
repetitive strain injuries and injuries incurred from lifting heavy objects.
Tripping, slipping and falling. Very common causes of workplace injury, encompassing
everything from slipping on a wet floor or tripping over a cord to falling off a chair or ladder, or
down a flight of stairs.
Being struck by objects. Serious injury or death can result from something as simple as a
hammer being dropped from an upper level of a construction site.
Other causes of workplace injuries include sharp objects, bacterial, chemical and electrical
hazards, excessive noise and exposure to UV radiation.
While employees have an obligation to observe OHS procedures and report potential
hazards, the onus is also on employers to maintain a safe workplace for their staff.
The introduction of federal OHS laws (Work Health and Safety Act) in 2015 provides for even
more scrutiny and greater penalties than those awarded in the past. The Act also requires
employers to:
Exercise greater due diligence to remain informed about OHS matters
Expand their duty of care to include contractors and casuals
Consult with employees about OHS matters in a particular way
Accept criminal consequences for discriminatory acts
Allow unions expanded right of entry in regard to OHS matters
In light of this legislation, employers need to be doubly certain they are not committing any
direct breaches of OHS practices.
A breach can also be indirect, such as not providing adequate training, so if you are in any
doubt about your compliance, now’s the time to undertake compliance training for yourself
and your employees.
The types of training that you should be instituting include:
Induction training for new employees
Hazard identification and control
Safe manual handling
What could have been done to detect early signs of problems in the management and
governance?
Complex projects often do not behave in the way expected, and in particular, effects within complex
projects are often time-delayed and take time to emerge. This paper considers identification of early
0457
Assessment 3
Corporate governance obligations for companies and directors under the Corporations Act
2001
Corporate governance is a driver of the performance of a company. The term 'corporate governance'
is broad and has many components.
This section of the website sets out ASIC's view on various aspects of corporate governance,
including any regulatory guidance we have issued. It includes general information on obligations of
company directors and officers as well as information that may be of interest to other governance
professionals such as risk and compliance officers.
The Corporations Act 2001 (Cth) requires that a company director or other officer exercise their
powers and discharge their duties with care and diligence [s 180]. This duty is subject to a business
judgment rule that requires a director making a business judgment to:
Make the judgment in good faith and for a proper purpose;
Not to have a material personal interest in the subject matter of the judgment;
Inform themselves about the subject matter of the judgment to the extent they reasonably
believe to be appropriate;
Rationally believe that the judgment is in the best interests of the corporation.
In addition, directors and other officers of companies must exercise their powers and discharge their
duties in good faith in the best interests of the corporation and for a proper purpose [s 181]. They are
prohibited from improperly using their position to gain an advantage for themselves or someone else
or to cause detriment to the corporation [s 182] and are prohibited from using information obtained as
a consequence of their role with the company to gain an advantage for themselves or someone else
or to cause detriment to the corporation [s 183]. These last two provisions also apply to employees of
the company.
All of the provisions give rise to civil obligations. They are also civil penalty provisions. In a case
where a court determines that a civil penalty provision has been contravened, it must make a
declaration to that effect and may order the person pay the Commonwealth a pecuniary penalty of up
to $200,000 and may order the person compensate the company for any loss as a result of the
contravention [Part 9.4B]. The court may also disqualify the person from managing corporations for a
period the court considers appropriate [206C].
The Corporations Act 2001 (Cth) also sets out criminal offences where a director or other officer acts
recklessly or is intentionally dishonest in their failure to exercise their powers and discharge their
duties in good faith and in the best interests of the company or for a proper purpose. Similarly,
criminal offences are created where a person recklessly or intentionally dishonestly misuses their
position or information they have gained through their position with the company [184].
Directors have a duty to make full and frank disclosure of information within their knowledge to enable
shareholders to make properly informed judgments on any matter [191].
Potential breaches that may occur (based on the case example and analyses)
To determine the most common breaches of occupational health and safety (OHS) practices, you only
have to look at the most common causes of injury in Australian workplaces every year.
The fact that these injuries are still occurring means that breaches are also occurring, whether
committed by employees failing to follow OHS procedures, or employers not taking adequate
preventative measures.
, According to Safe Work Australia, key Workplace Health and Safety (WHS) statistics Australia 2018
shows the most common cause of work-related fatalities is from vehicle collision and the industries
where most fatalities occur are agriculture, forestry and fishing, transport, postal and warehousing.
The most common injuries that occur in Australian workplaces are:
Body Stressing (Overexertion). The leading cause of workplace injury in Australia. It includes
repetitive strain injuries and injuries incurred from lifting heavy objects.
Tripping, slipping and falling. Very common causes of workplace injury, encompassing
everything from slipping on a wet floor or tripping over a cord to falling off a chair or ladder, or
down a flight of stairs.
Being struck by objects. Serious injury or death can result from something as simple as a
hammer being dropped from an upper level of a construction site.
Other causes of workplace injuries include sharp objects, bacterial, chemical and electrical
hazards, excessive noise and exposure to UV radiation.
While employees have an obligation to observe OHS procedures and report potential
hazards, the onus is also on employers to maintain a safe workplace for their staff.
The introduction of federal OHS laws (Work Health and Safety Act) in 2015 provides for even
more scrutiny and greater penalties than those awarded in the past. The Act also requires
employers to:
Exercise greater due diligence to remain informed about OHS matters
Expand their duty of care to include contractors and casuals
Consult with employees about OHS matters in a particular way
Accept criminal consequences for discriminatory acts
Allow unions expanded right of entry in regard to OHS matters
In light of this legislation, employers need to be doubly certain they are not committing any
direct breaches of OHS practices.
A breach can also be indirect, such as not providing adequate training, so if you are in any
doubt about your compliance, now’s the time to undertake compliance training for yourself
and your employees.
The types of training that you should be instituting include:
Induction training for new employees
Hazard identification and control
Safe manual handling
What could have been done to detect early signs of problems in the management and
governance?
Complex projects often do not behave in the way expected, and in particular, effects within complex
projects are often time-delayed and take time to emerge. This paper considers identification of early
