Chapter 6 – DO DIRECTORS DUTIES EVER END?
Dave Jenkins owns his pool cleaning business with his wife Angela. They are both listed as directors of the company, and both have access to company funds. Angela secretly had her doubts about marrying Dave, because a friend told her prior to her wedding that he had acted inappropriately towards her at a party. She chose to marry him despite this, however, it was important to Angela that she remains financially independent.
As a result Angela also owns a separate business where she provides marketing solutions for local companies. Dave has no involvement with this business, and Angela wishes to keep it that way.
A few years later, Angela discovers that her suspicions were correct, and that Dave was a serial cheater. They agreed to divorce, and Angela ceased to be a director of the company.
A month later, Angela’s marketing company was having financial difficulty, and she realised that she still had access to the accounts from Dave’s pool cleaning business. To pay her debts, Angela takes $80,000 from Dave’s pool company, which the bank allows her to do believing that she is still a director.
1. When marrying or entering a De Facto relationship with someone whom you are not sure you can trust financially, it may be useful to sign a financial agreement to will protect yourself in the event of separation.
2. A director owes fiduciary duties to their company which means they must act in the best interests of the company
3. Serious criminal consequences may apply if a director breaches their fiduciary duties.
Q and A
Q: Do fiduciary duties end when you cease to be a director of the company?
A: It depends on the facts of the specific case, especially the circumstances in which the directorship ends. If it is for legitimate reasons and if the actions do not cause financial detriment to the company, then fiduciary duties not apply.
Q: Would Angela be guilty of a criminal offence if she had transferred the funds to her own company whilst she was still a director of the Pool Company.
A: Yes as she would not be acting in the interests of the company, in which case she would be in breach of her legal duties including under the Corporations Act 2001.
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