Care and diligence—directors and other officers
(1) A director or other
officer of a corporation must exercise their powers and discharge their duties
with the degree of care and diligence that a reasonable person would exercise
if they:
- (a)
- were a director or officer of a corporation in the
corporation's circumstances; and
- (b)
- occupied the office held by, and had the same responsibilities within the
corporation as, the director or officer.
- Note: This subsection is a civil penalty provision (see section 1317E).
Business judgment rule
(2) A director or other officer of a corporation who
makes a business judgment is taken to meet the requirements of
subsection (1), and their equivalent duties at common law and in equity,
in respect of the judgment if they:
- (a)
- make the judgment in good faith for
a proper purpose; and
- (b)
- do not have a material personal interest in the subject matter of the
judgment; and
- (c)
- inform themselves about the subject matter of the judgment to the extent
they reasonably believe to be appropriate; and
- (d)
- rationally believe that the judgment is in the best interests of the
corporation.
The director's or officer's belief that the judgment is in the best interests
of the corporation is a rational one unless the belief is one that no
reasonable person in their position would hold.
- Note: This subsection only operates in relation to duties under this section
and their equivalent duties at common law or in equity (including the duty of
care that arises under the common law principles governing liability for
negligence)—it does not operate in relation to duties under any other
provision of this Act or under any other laws.
(3) In this section:
"business judgment" means any decision to take or not take action in respect
of a matter relevant to the business operations of the corporation.
Commonwealth Numbered Acts