Directors’ “best interests” duty in practice

Australian directors have important fiduciary, statutory and common law duties. This AICD Practice Statement focuses specifically on the duty to act in good faith in the best interests of the corporation.

In recent years, there has been debate over whether the current formulation of the ‘best interests’ duty appropriately reflects community expectations regarding the extent to which stakeholders can be factored into decision-making. 

A new legal opinion from Bret Walker AO SC and Gerald Ng MAICD provides greater clarity around this core duty. Read the AICD’s Practice Statement for guidance on how directors can discharge this duty effectively in practice.

AICD practice statement | July 2022

• Directors have a duty to act in good faith and the best interests of the corporation.
• Directors have considerable discretion to identify the best interests of the company, taking into account relevant facts and circumstances.
• While shareholders/members’ interests are central, directors can, and should, also consider a range of stakeholder interests - doing so is often necessary to protect an organisation’s reputation and ensure its sustainability.
• As a guiding principle, directors should take a long-term view of where the company’s interests lie.

Additional resources:

• Download Allens Linklaters research on the best interest duty in peer jurisdictions
• Download AICD Guidance: Elevating Stakeholder Voices to the Board 
• Download AICD Director Tool: General duties of directors