Related party transactions under Pt 2E of the corporations act: time for reconsideration

The related party provisions under Pt 2E of the Corporations Act 2001 were introduced in 1992 to protect the resources of companies and shareholder interests by requiring that directors disclose financial benefits given to 'related parties' -- those capable of exercising significant influence over the giving of such benefits. The contention of the authors in this article is that Pt 2E has been unsuccessful in achieving its intended purpose, and should be repealed in its entirety. The authors argue that the various provisions of Pt 2E are so confusing and convoluted that they potentially violate the rule of law virtue that laws must be promulgated in a manner that is clear, so that it is apparent from reading the laws what one must do. Further, [*2] the manner in which Pt 2E is presently drafted, especially the definition of related party, fails to reflect the purpose behind the provisions, making the overall operation of Pt 2E ineffective. It is also argued that Pt 2E is superfluous since the fiduciary duty of directors to disclose a conflict of interest, and to a lesser extent the requirement for disclosure of material personal interests under s 191 of the Corporations Act, adequately deal with the transactions presently attracting the attention of Pt 2E. In light of all this, it is contended that the law would be demonstrably improved by repealing Pt 2E.<br />