The Corporations Act provides defences where directors may be in breach of duties, including when they have relied on third-party advice or where a director has made a ‘business judgement’ decision. The ‘business judgement’ defence is applicable where the director has:
• made a business decision in good faith;
• not had a material personal interest in the subject of the decision;
• they believe the decision is in the company’s best interests.
In some circumstances, creditors may pursue directors for losses incurred due to the company’s actions. Directors are protected from personal liability by provisions in the Act which protect directors who can show that their decision or action was likely to lead to a better outcome for the company than might have been achieved by putting the company in administration or liquidation.
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