The Australian Institute of Company Directors (AICD) recently engaged barristers to advise on the correct meaning of the directors’ best interests duty. The legal opinion and the related AICD Practice Statement concluded that directors should have regard to the interests of stakeholders, including employees, customers, suppliers, creditors, Traditional Owners, the environment and the broader community, in addition to the interests of shareholders.
Whilst the formulation of the statutory and general law best interests duty has not changed, the way in which this duty is interpreted continues to evolve. They contend that the duty of directors to act in the best interests of the corporation has evolved to allow directors to consider the interests of stakeholders ‘provided that there is rational justification for doing so by reference to the long-term interests of the company, including its interest to avoid reputational harm’.
They also suggested that care and due diligence duty requires directors to consider, plan for, address and disclose climate change risks.
Disclaimer: This does not purport to be comprehensive or to render legal advice. You should not act based on any information contained in this publication without first obtaining specific professional advice. Consult your legal advisor to determine if this applies to you.
