The duty to avoid a conflict of interest was introduced to ensure that directors act in the best interests of the company, even if this may not be in the director's personal interests.

What's the Issue?

Corporate governance is heavily regulated in Australia and there are a number of duties of directors that must be observed as highlighted by the Australian Securities and Investment Commission.

A breach of the duty to avoid any conflict of interest will have serious consequences for both the director and the company.

What is a Conflict of Interest?

A conflict of interest arises when a director puts his or her own personal interests ahead of the interests of the company.

Conflicts of interest may be direct or indirect and are more prevalent than one might expect. This is because of the complexity of relationships that exist between directors, other businesses, their families and the community.

Not all personal overlaps between the director and a company lead to a conflict of interest. It must be noted, however, that directors have a duty to notify the other directors when a material personal interest arises.

What are some examples of conflicts of interest that might arise?

Sitting on the board of a competitor company

If a director or a member of his or her family profits (or potentially could profit) from a deal made by the company as it is prohibited under the Corporations Act 2001 (Cth) to use information or a position to take advantage of a business opportunity that belongs to the company.
A Director conducting business with a subsidiary company in the context of a corporate group of companies may also lead to a conflict of interest. Awarding contracts to family members may lead to a conflict if the contract is not on commercial terms and in the best interests of the company.

Any Tips?

Check your company constitution to see how it addresses actual or potential conflicts of interest. It may be a good idea to update the constitution or introduce a new company policy which identifies what steps should be taken if a conflict of interest arises. As soon as you may think that a conflict or potential conflict has arisen, give full disclosure of the nature of your interests to the board. If the board is concerned that there is or may be a real or perceived conflict, then it is recommended that legal advice be obtained as soon possible. Lead by example and make sure that all members of the board set a high standard of ethical and lawful behaviour which the rest of the company can follow.

For further guidance on duties of directors, please feel free to give Mitchell Zadow (Managing Principal and Accredited Specialist in Commercial Law) on (03) 8561 3318.

The information contained in this article is intended to be of a general nature only and should not be relied upon as legal advice. Any legal matters should be discussed specifically with one of our lawyers.

Liability limited by a scheme approved under Professional Standards Legislation.

Written by a member of our Legal Team

David Sharrock

For further information contact

Mitchell Zadow

Mitchell is the Managing Principal of our law practice.

He is an Accredited Specialist in Commercial Law (accredited by the Law Institute of Victoria). He also deals with areas of Employment Law, Wills & Estate Planning and Probate. For further information, contact Mitchell on his direct line (03) 8561 3318.

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The duty to avoid a conflict of interest was introduced to ensure that directors act in the best interests of the company, even if this may not be in the director's personal interests.

However, in this article we will set out the factors that influence how long it will take to obtain a Grant of Probate and to administer an estate in Victoria.

The basics

First things first: what is a Grant of Probate? A Grant of Probate is effectively a document issued by the Supreme Court of Victoria which formally authorises an executor to manage the estate of a deceased person in accordance with their Will. Without Probate, the asset holders (say a bank or share registry) cannot be satisfied as who has the correct authority to receive the deceased's assets and may refuse to pay out.

Sometimes, for smaller estates or if assets are mostly jointly owned with a surviving spouse, asset holders might agree to release payment without requiring a Grant of Probate. This is usually on the basis that the person who receives payment promises to repay (or Indemnify) the asset holder if it turns out they paid to the wrong person.

If there is no Will, then you cannot obtain a Grant of Probate. Instead you obtain Letters of Administration. This is effectively the same, in terms of authorising someone to administer the estate, and would usually be obtained by the person who is the closest next-of-kin to the deceased.

“A Grant of Probate is effectively a document issued by the Supreme Court of Victoria which formally authorises an executor to manage the estate of a deceased person in accordance with their Will.”

Timeframes for Probate in Victoria

In order to obtain a Grant of Probate, the Supreme Court needs to be given information about the assets and liabilities of the estate, the deceased person, the witnesses to the Will, the executors and the Will itself. An advertisement of your intention to apply for Probate must also be published on the Supreme Court website for at least 14 days prior to any application being lodged.

Often, making enquires to obtain all the necessary information can take a number of weeks. Also, you will need the Death Certificate for the application for Grant of Probate and possibly for making proper enquires regarding the assets and liabilities. Waiting for the Death Certificate to issue can therefore add a few more weeks to the process. Overall, if you have your application for Grant of Probate lodged within 1 to 2 months from the date of death, you are making timely progress.

The Court itself usually does not take long to process the application (maybe another 1 to 2 weeks) and this is completed using the electronic Supreme Court filing system. This means you do not have to go to a Court hearing. The timeframe for processing applications for Letters of Administration is even less, given that there is no Will document for the Court to consider. There is also a general discretion for the Court to raise a 'Requisition' asking for more information before they review the application - this can sometimes delay matters.

“Overall, if you have your application for Grant of Probate lodged within 1 to 2 months from the date of death, you are making timely progress.”

So, here we are a few months after death and you finally have a Grant of Probate or Letters of Administration. It is important to remember that this is the start of the estate administration and not the end. For a very simple estate, you might only need a further month or so to cash the assets and pay them to the correct beneficiaries. However, it can often be more complex than that. Factors that determine the timeframe to administer the estate include:-

Some assets will take time to cash or transfer. For example, if selling a property, final settlement might be 60/90/120 days from the day of sale.
There is a 6 month period for challenges to be brought against the estate and executors must wait until this period expires before distributing the estate, if there is any risk that a disgruntled family member might come forward.
There might need to be final tax returns for the deceased or for the estate. Failing to wait for the ATO to process these could leave the executor personally liable for a tax bill.

You might need to advertise for creditors to come forward and wait for a period of months while this advertising timeframe expires. This protects the executor if they are unsure of all of the deceased's financial dealings and creditors.
It might not always be a good time to immediately cash estate assets. For example, the shares just took a nose-dive, do you still sell regardless of available price?

There is a general rule that executors have an 'executor's year' to complete the estate administration. This means that you should be aiming to have the estate finalised and distributed within 12 months from the date of death.

Liability limited by a scheme approved under Professional Standards Legislation.

Need help with Probate?

Our expert legal team is ready to take your call!

Mitchell is the Managing Principal of Sharrock Pitman Legal. He is an Accredited Specialist in Commercial Law (accredited by the Law Institute of Victoria). He also deals with areas of Employment Law, Wills & Estate Planning and Probate and can answer all your questions related to probate.

For further information, contact Mitchell on his direct line:

DIRECT LINE:

(03) 8561 3318

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Duties of directors: Conflicts of interest

The duty to avoid a conflict of interest was introduced to ensure that directors act in the best interests of the company, even if this may not be in the director's personal interests.

What's the Issue?

What is a Conflict of Interest?

What are some examples of conflicts of interest that might arise?