6 May 2014

The history of corporate governance over the last one hundred and fifty years suggests that its fundamental purpose has been to maximise corporate profit with a view to increasing shareholder wealth. However, stake-holding conceptions of the company are increasingly emerging and influential. Theories of corporate governance developed from the notion that companies need not and should not be operated solely in the interests of their shareholders are gaining traction. According to ‘stakeholder’ advocates, changes in corporate management and company law should be made to ensure that, in their decision-making and policy formulation, company directors take account of the interests of not only shareholders but all those with a ‘stake’ in the company, including employees, creditors, suppliers, consumers, the environment and the community at large.

Economic support for the theory arises from the view that long-term profitability of the company is dependent on more than just concentration on shareholder wealth. This is commonly known as the ‘stakeholder concept’ or the ‘stakeholder theory’.

To some extent ‘stakeholder’ theory is recognised in the legal principles pertaining to corporate governance in Australia. The primary responsibility for stakeholder protection normally falls on the board of directors, as the highest decision-making body in the company. As one example only, the statutory duty of good faith in section 181(1) of the Corporations Act 2001 (Cth) (‘Corporations Act’) requires directors and other corporate officers to exercise their powers and discharge their duties ‘in good faith in the best interests of the corporation’. In 2006 the Corporations and Markets Advisory Committee (CAMAC) found that the duty of directors to act in good faith in the interests of the company pursuant to s181 was broad enough to allow directors to consider the interests of stakeholders.

The extent of stakeholder protection is an evolving and controversial area of law, and was to some extent considered in the litigation involving the Bell Group of companies. One of the key issues in the Bell Group litigation was the extent to which directors of companies that are insolvent or approaching insolvency ought to consider the interests of creditors. In his judgment, Owen J held that there had been a breach of duties on the part of the directors. In taking into account the circumstances that befell the Bell Group, and the claim of the banks, his Honour found the directors had not paid sufficient heed to the interests of creditors generally.

Expansion of director’s duties – too much?

Some commentators argue that the majority’s view in Bell sends the wrong message to directors and executives, that is: if in doubt, close the business for fear of prejudicing creditors. Arguably, this could push more businesses into formal insolvency proceedings and impair strategies for business rescue, which would be an undesirable outcome.

At HHG Legal Group we regularly advise directors and officers, as well as stakeholders, as to their obligations and rights in insolvency or near insolvency situations. We have developed tools for analysing the risks and appropriate trigger points for taking action to minimise the risk of claims arising against directors and officers, whilst working together with other professionals such as accountants, CFO’s and reconstruction experts. The key message to all directors and officers in a distressed corporate environment is to take advice early and be pro-active and vigilant in laying out and executing a transparent and clear plan of action, with clear exit points.  The best kind of advice requires the co-operation and teamwork of accountants, lawyers and reconstruction consultants, as well as other professionals like a skilled business coach. No one profession or set of expertise is sufficient to truly deliver the best advice and outcome.

This is general information only, and does not constitute specific legal advice. If you would like further information in relation to this matter or other legal matters please contact our office on Freecall 1800 609 945 or via email.

100 years of Supporting West Australians

"My family law experience with Mary Roubos has restored my faith in solicitors in general. She not only demonstrated her legal expertise and flair, but also showed a compassionate and understanding nature during the lengthy process. I felt that Mary went above and beyond her obligations as my solicitor, and really listened to me. I would highly recommend Mary and her assistant Debra Wilson, who also demonstrated professionalism and excellence on all levels."

Renee Frangiosa

"Always fast and thorough service. Thank you"

Sitka Pil

"I found Ben most helpful and always prompt to let me know where things were at. Will definately use Ben again and will recommend to others."

Gerrit and Mary Van Bralal

"We wish to express our thanks for your help in attending to our mother/ wife's will - Mrs Grace Margaret Vessey. Aimee was extremely helpful and easy to deal with. We are greatful for your help with our affairs."

Ms Rosalyn Norman, Mr Stephen Vessey

"Thank you ever so much for all your hard work on my case Nicole, I really appreciate everything you did for me."

Workers Compensation Client

"Thank you for such great assistance with the transaction of Flying Domestics on behalf of Lorna Good. It has been such such a pleasure to work with the HHG Legal Group and I look forward to working with you in the future."

Jim Goodwin

"Simon Creek and his team were at all times empathic, professional and confident.  My matter needed to be addressed within a pressing time frame, and their availability at short notice and contact after hours was much appreciated.  It caused me considerable stress, but having such a thoroughly reliable and competent team to call on helped me to feel in control. Although I hope not to need their services again in future, I would be confident in doing so!"

Dr Lana Bell

"A good outcome is what we can expect.  A great outcome is a sign of a company which does the very best for their clients. A very big thank you to Daniel Morris for showing empathy towards my small and much needed legal action.

To HHG Legal Group, thank you for a great outcome.  I would recommend your company to anyone seeking legal services."

Jan Atkinson

"Your support this morning was amazingly kind, not to mention your totally reassuring competence, knowledge and wisdom that you used on my behalf.  It was extremely reassuring to have your knowledgeable support, and I particularly appreciated your real and obvious kindness to me. It means so much at a very difficult time. I'm so grateful to you."

Family Law Client

"I highly recommend the services of HHG Legal Group for both personal and business needs. HHG is very up to date with legal advice and are in tune with the evolution of business."

Robert Forgione

"Sue and myself would like to thank HHG for the way in which our dispute was resolved. It is good to know that people who do not have an understanding of the legal system can rely on people like yourself and the company you represent. Without the assistance of HHG we could not have resolved the problems we were facing, not only have we resolved the issue but the outcome was more favourable then we would have thought possible. Thank-you and please pass on our thanks to all those who worked behind the scenes to achieve this outcome."

Rick and Sue Ashton

"Janene was very professional and we established a good rapport quickly. The subject of death and wills can be quite confronting to deal with, however Janene's approach was soft and accommodating."

Lynette Livesey

"A big thank you to HHG for their professional service, continued support, and wide range of legal knowledge. Our clients have given us nothing but kind words regarding HHG Legal Group and so we have no hesitation in referring and recommending Simon Creek and HHG Legal Group for their outstanding services and legal expertise."

Nigel Plowman, Director at McKinley Plowman & Associates

"Simon is a friendly and practical legal advisor. I have received great feedback from the clients I have referred to him and his team at HHG Legal Group."

Richard Beal, Director at BDO

"Over the last few years, I have been impressed by Simon’s legal ability, management skills, entrepreneurial spirit, personal integrity and people skills. He appears to be that rare breed of lawyer – both knowledgeable and commercial."

Michael Malone, Founder of iiNet

"Our family has been a client of HHG Legal Group over many years and most recently in 2013 and February 2014.  Business has included drawing up of wills for three generations and preparing of probate for my father in law.

I would have no hesitation in recommending HHG Legal Group to anyone requiring such services."

Bernice Climie

"You should be congratulated for the manner in which your staff address clients and we found our dealings with your company, once again a very pleasant experience and we would like to truly thank you for your efforts."

Steve Harvey and Jane Powell

"HHG Legal were absolutely fantastic. Extremely responsive and brought calm to our chaotic family situation through their knowledge and caring attitude. Extremely professional from our very first contact with them and they expertly guided our family though the required legal process over almost a 12 month period."

Amanda Williamson

"Fantastic team! They really care about their client. Tim Colcutt is a 'go that extra mile' guy who gives his client his all. I can't recommend HHG and Tim enough."

Kerry Samson

"Anne Hurley has been such a valuable resource of information and advice, her wealth of knowledge is truly impressive and her ability to explain things in a way that makes them easily understood is very much appreciated. Anne and the wider HHG Legal Group are always a pleasure to work with."

Giorgia Parham

"I had a fantastic lawyer in Anne Hurley. She helped me out a great deal with good, sound advice in a friendly , professional manner. First class, thanks Anne"

Graeme Hammond

"Marine Plant Systems has been working with HHG Legal Group for a few years now and they continually provide first class service. Their professional advice has been invaluable to our company."

Carolin Grimm

"We were kept up to date at all times. Pricing was always updated over the time period so we remained "in budget". Personal access to someone whenever I had questions. All in all a great experience without too much fuss."

Rosslyn Tasker - COO AltusQ Pty Ltd

"Good service you can count on."

Miles Lee

"HHG Legal Group have provided outstanding support as I have taken the journey of buying a business, their professionalism is beyound reproach. Their assistance throughout the Due Diligernce process have been invaluable, I would fully recommend them."

Mark Armitage

"I have experienced how good the HHG Legal Group team are over the last 6 years and highly recommend them."

Lyn Hawkins

"Very friendly and efficient service - what a pleasure working with Anne."

Jacques Taylor

"I highly recommend Daniel from HHG Legal Mandurah. When dealing with a complicated legal property matter recently I was extremely impressed by Daniel's honesty and integrity and the legal advice I received. I am very happy with the service from HHG Legal."

Tony Walker