Metropolitan Fire Systems Pty Ltd V Miller Company Law

As we know, directors are appointed by shareholders to manage a business. According to the law, directors have general power of management and members cannot override the decisions of the board. Directors have great power to control business activities. The law designs a series of directors’ duties to make sure the directors manage the company responsibly basic on interests of the company. However, whether those duties are effective in legal practice is a debate. In my opinion, the duty to act with reasonable care and diligence and the duty to prevent insolvent trading have not helped to prevent companies going into insolvency. The reasons are outline below.
Explanation
Directors have duties to ensure best interests of the company as whole including creditors. Under Corporations Acts, directors are required to act with reasonable care and diligence and prevent insolvent trading.
Certain statutory duties of care, skill and diligence was laid down in s107 of it Companies Act by …show more content…
It has been changed over time afterward. The majority of cases have been decided under S556 and one significant case, Metropolitan Fire systems Pty Ltd v Miller have been decided under S588G (Harris, 2009). According to (Harris, 2009), the focus of amendment was on criminal liability. Until 1993, the insolvent trading provision has become the civil penalty provision under 588G. This provision imposed liabilities on directors only (including De facto director and shadow director) instead of on directors or managers. The requirement of “suspecting insolvency or would become insolvency” replaced the earlier requirement of “expecting be able pay all debts when become due”. Liquidators were allowed to bring processing against directors under this section. Simultaneously, the aim of this provision changed to protect creditors instead of imposing criminal sanction on director (Hii, 1999). This section applies if (Hanrahan,