Corporations Act 2001 - Section 180: Care and Diligence - Civil Obligation Only
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Details
- Date Published
- 16 Jan 2024
- Priority Score
- 2
- Australian
- Yes
- Created
- 16 Apr 2026, 06:00 am
Description
<a href="https://news.google.com/rss/articles/CBMie0FVX3lxTE96M1JWQXdLdmUyaS1jdElCUVBVM01FaWtyZkkzNDktMmVvTi1NSVBmZ21FclIzWVlqOUJRM2hZSXdNMzNTME1pellVUVk2MmVDQzc5VW1BRVFvcUlDX0VfVU9lU1NLQTdmX2pLQzY0WFNJNzJfMGRFOGNoMA?oc=5" target="_blank">CORPORATIONS ACT 2001 - SECT 180 Care and diligence--civil obligation only</a> <font color="#6f6f6f">AustLII</font>
Summary
This legislative excerpt details the statutory duty of care and diligence required of directors and officers under Australian corporate law. It establishes the 'business judgment rule', which provides a safe harbor for decisions made in good faith, provided leaders inform themselves to a reasonable extent. While not specific to AI, this foundational legal obligation is increasingly relevant to AI governance as it dictates the legal standard for how Australian boards must manage foreseeable risks, including catastrophic safety risks associated with the deployment of frontier AI systems. The requirement for directors to inform themselves 'to the extent they reasonably believe to be appropriate' sets a critical benchmark for corporate accountability in the context of rapidly evolving technological harms.
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CORPORATIONS ACT 2001 - SECT 180
Care and diligence--civil obligation only
Care and diligence--directors and other officers
(1) A director or other officer of a corporation must exercise
their powers and discharge their duties with the degree of care and diligence
that a reasonable person would exercise if they:
(a) were a director or officer of a corporation in the
corporation's circumstances; and
(b) occupied the office held by, and had the same
responsibilities within the corporation as, the director or officer.
Note: This subsection is a civil penalty provision (see section
1317E).
Business judgment rule
(2) A director or other officer of a corporation who makes a
business judgment is taken to meet the requirements of subsection (1),
and their equivalent duties at common law and in equity, in respect of the
judgment if they:
(a) make the judgment in good faith for a proper purpose; and
(b) do not have a material personal interest in the subject
matter of the judgment; and
(c) inform themselves about the subject matter of the judgment
to the extent they reasonably believe to be appropriate; and
(d) rationally believe that the judgment is in the best
interests of the corporation.
The director's or officer's belief that the judgment is in the best
interests of the corporation is a rational one unless the belief is one that
no reasonable person in their position would hold.
Note: This subsection only operates in relation to duties under this
section and their equivalent duties at common law or in equity (including the
duty of care that arises under the common law principles governing liability
for negligence)--it does not operate in relation to duties under any other
provision of this Act or under any other laws.
(3) In this section:
"business judgment" means any decision to take or not take action in respect
of a matter relevant to the business operations of the corporation.
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