Corporate decision-making involves more than business judgment.
Directors operate within the framework of the Companies Act, the company’s constitutional documents, board processes, shareholder rights and other applicable laws. Depending on the circumstances, duties may involve good faith, proper purpose, conflicts of interest, disclosure and responsible use of company powers.
A board decision may therefore be commercially sensible yet procedurally vulnerable if the required corporate process was ignored.
Companies should maintain proper board records, approvals, declarations and supporting documents for significant decisions. Directors should also understand when a matter requires disclosure or shareholder involvement.
Corporate governance is not merely a compliance department’s concern. It is part of protecting the company, its directors and its stakeholders when decisions are later questioned.
This article is for general information only and is not legal advice. Every matter turns on its own facts. Please take professional advice before acting.