Directors are not merely contractual agents. They are fiduciaries—and fiduciary duties are among the most demanding obligations known to Australian law. They go beyond statute and cannot be fully captured in any written code.
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What Is a Fiduciary Duty?
A fiduciary is someone who undertakes to act for or on behalf of another in circumstances that give rise to a relationship of trust and confidence. A director is a classic fiduciary—they are entrusted with the management of the company’s affairs and hold power over assets that belong to the company (and indirectly, its shareholders).
Fiduciary duties arise in equity—they are not created by statute. They co-exist with the statutory duties under the Corporations Act, but they are not the same thing.
The Core Fiduciary Duties
The core equitable fiduciary duties of a company director are:
| Duty of loyalty | Act solely in the company’s interests—not in personal interests or the interests of third parties. |
| Duty to avoid conflicts | Not place themselves in a position where personal interests conflict, or may conflict, with the company’s interests—without disclosure and consent |
| Duty not to profit | Not make an undisclosed profit from their position—including through corporate opportunities, commissions, or use of confidential information. |
| Duty to act for proper purposes | Exercise corporate powers only for the purposes for which they were conferred—not to entrench management, dilute shareholders, or achieve personal objectives. |
How Fiduciary Duties Differ From Statutory Duties
The distinction matters in practice:
| Statutory duties (ss180-184) | Created by the Corporations Act; carries civil penalties enforced by ASIC; breach remedied by compensation order under s1317H |
| Fiduciary duties (equitable) | Arise from equity; remedied by an account of profits, constructive trust, equitable compensation, or rescission; no ASIC role in enforcement; enforced in the company’s name or derivatively |
Fiduciary remedies can be more powerful than statutory remedies in some cases. An account of profits strips the wrongdoer of all gains from the breach—not just the company’s loss. Where a director has profited handsomely from a breach, equitable remedies can exceed the company’s quantified loss.
Corporate Opportunities: The Classic Fiduciary Scenario
The duty not to profit and the duty to avoid conflicts come together most powerfully in the corporate opportunity doctrine. A director who learns of a business opportunity in their capacity as director cannot take that opportunity for themselves—they must first offer it to the company. If they take it without disclosure and consent, the company can:
- Claim the profits made by the director from the opportunity (account of profits)
- Assert a constructive trust over the assets or venture acquired using the opportunity
- Seek equitable compensation for the loss of the opportunity
Scope and Duration of Fiduciary Duties
Fiduciary duties apply to a director throughout their appointment. Some obligations—particularly around confidential information and corporate opportunities in the pipeline—may continue for a period after resignation. A director cannot resign to personally take a corporate opportunity that was under active consideration during their tenure.
Frequently Asked Questions
Q: Can fiduciary duties be modified by the company’s constitution?
A: To a limited extent. A constitution can authorize directors to hold conflicts of interest and vote on matters where they have an interest. But the core fiduciary duty of loyalty—not to act dishonestly against the company’s interests—cannot be fully excluded.
Q: Do fiduciary duties apply to shadow directors?
A: Yes. Courts have applied fiduciary principles to shadow directors and de facto directors who exercise real influence over the company’s decision-making, regardless of their formal title or appointment.
Q: Can a shareholder sue for breach of fiduciary duty directly?
A: Generally, the claim belongs to the company. A shareholder can sue derivatively under s236 of the Corporations Act or can bring a personal claim if the fiduciary duty owed to the company is also found to be owed to the individual shareholder (rare—requires specific circumstances).
Q: What is an account of profits?
A: An account of profits is an equitable remedy that requires the wrongdoer to account to the company for all profits made in breach of fiduciary duty—regardless of the company’s actual loss. It is a disgorgement remedy, not a compensatory one.
Q: Can a director personally use confidential company information after leaving?
A: No. The duty not to use confidential information acquired as a director survives resignation. A director who uses that information to set up a competing business, solicit clients, or make a profit is in breach of their post-termination obligations.
Q: How are fiduciary claims enforced if the company will not act?
A: Where the company (controlled by the breaching director) will not sue, a shareholder can bring a derivative action under s236 of the Corporations Act with the court’s leave. Alternatively, an oppression remedy may be available if the failure to pursue the claim is itself conduct that is unfairly prejudicial to the minority.
