The Corporations Act 2001 (Cth) expects the company director to act in a way that respects the due diligence requirements of section 180. This duty is applicable at all times in the decision-making process. Under common law duties, the first is the duty of acting in honest and good faith when representing the company interests. Here there is a subjective test in order to understand what compliance in good faith means. Given a certain situation the directors should not fail in their own minds.
If they do so then they are considered to have breached the faith. Company interests and own interests should not be mixed and the director at all points should ensure that company interests are put forward first. An objective standard of whose interests are given importance as perceived by a rational bystander would be considered when assessing a breach test. In considering the interests of company, the complete set of shareholders as a collective group and their interests should have been considered according to Whitehouse v Carlton Hotel Pty Ltd (1987) 162 CLR 285 and Walker v Wimborne (1976) 137 CLR 1.
Under common loan duties, the director should in no way act in an improper way. Acting in an improper way would mean that the director was trying to coerce action that was favourable for him but for not others. The action should further the interests of the company. Where the director does not act in the prescribed way then they are acting improperly. This is a breach of the common law and the statutory sections that require director to behave properly.
Under common law duties, the director was to exercise duties of care and diligence as well. They cannot be ignorant of company’s affairs and when necessary they should question or answer for some of their actions. This is observed in the Statewide Tobacco Services Ltd v Morley (1990) 2 ACSR 405. Where such an issue of lack of due diligence is brought to the directors notice then they should attempt to correct it in an informed way. When they don’t take corrective action even after understanding the situation, they have breached their duty. Finally, the duty to avoid conflicts of interest is one of their main duties. The director must act in such a way that they fulfil their fiduciary duties towards the company. In doing so may not have any form of direct or indirect conflict of interest.