Good observations taximoney : made me think about the following and consequences of resolutions being passed or not.
True duty of directors : Powell J in Russell Kinsella Pty Ltd (in liq) v Kinsella (1983) NSW said that the true duty of directors is a duty to refrain from exercising any of the powers vested in them in order to obtain for themselves, or any of them, some private advantage, or in order to achieve some object other than that for which the power was vested in them. He further held that a company in general meeting could approve a course of action, after full disclosure of all relevant facts, which would otherwise involve a breach of fiduciary duty on the part of the directors, or could ratify a course of action which involved a breach of duty on the part of its directors.
In Winthrop Investments Ltd v Winns Ltd (1975) NSW, it was held by the Court of Appeal that a general meeting of the shareholders in the company, to whom a proper and full disclosure of all relevant facts has been made, may ratify an exercise of power by the directors of that company which constitutes a breach of their fiduciary duty to the company; and may give advance authority for an exercise of power which would otherwise involve such a breach.
It may be concluded that if directors’ resolutions for action are:
(1) Passed at a General Meeting then directors’ action is approved even if someone considers there might be an improper use of power;
(2) NOT passed, directors’ action is NOT approved and there is NO relief from any breach of duty, if this were to be the case.
This comment is for discussion purposes. It must NOT be construed in any way as professional advice.
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