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interests of various parties in the company, for in most cases their interests are inter-
related, this being necessary for the survival of the company. Difficulties arise when
these interests are in conflict with one another and in such cases the question is
whose interests should prevail. Since the duty is owed by directors to the company,
no interests should triumph over the others; it is essential for directors in achieving
their objectives not to expose any groups to unnecessary risks. Directors should
consider all interests without any preference.
However, in defining the interests of the company, the courts traditionally equate
those interests with the financial interest of the shareholders. 37 This is because a
company was an extension of a partnership and partners were identified as the
company. 38 Moreover, shareholders are the residual claimants of the company‟s
assets after all other claims, including those of creditors, have been met. 39 This trend
continued even after the separate legal entity principle was introduced. Creditors
have always been considered as outsiders who can protect themselves by contract
and hence received little sympathy from the courts. 40 However, in a modern complex
society and a globalised economy, it is no longer sufficient for a company to
concentrate only on shareholders‟ profits, and it must be subjected to a wider
responsibility. 41
case as the present) mean the company as a commercial entity distinct from the corporators: it
means the corporators as a general body;” Foss v Harbottle (1843) 2 Hare 461; Re Roith (WM) Ltd
[1967] 1WLR 432.
37 Paul L. Davies Gower and Davies Principles of Modern Company Law (8 th ed., Sweet & Maxwell,
London, 2008) at 127; Austin and Ramsay above n26 at [8.010]; Irene Trethowan “Directors‟
Personal Liability to Creditors for the Company Debt” (1992) 20 ABLR 41 at 77.
38 Paddy Ireland “Company Law and the Myth of Shareholder Ownership” (1999) 62 MLR 32 at 39-
40.
39 Flannigan above n26 at 279; Jonathan R Macey and Geoffrey P Miller “Corporate Stakeholders: A
Contractual Perspective” (1993) 43 Uni Toronto LJ 401 at 406
40 Trethowan above n37 at 48.
41 Ibid, at 74; James McConvill “Directors‟ Duties to Stakeholders: A Reform Proposal Based on
Three False Assumptions” (2005) 18 AJCL 88 at 90.
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