1. What directors of a JV legally owe
Once someone sits on the board of a joint venture company, they owe duties to the JV itself, not to whoever appointed them.
Under Australian law (Corporations Act + general law), directors must:
Act in the best interests of the JV
Act for a proper purpose
Avoid misuse of position or information
Manage conflicts appropriately
That duty does not change just because:
They are an employee of a shareholder, or
They were nominated by the parent company
So you’re absolutely right on the principle:
> If acting in the parent’s interests conflicts with the JV’s interests, the director must put the JV first.
---
2. Does that mean employee-directors are “in conflict”?
Technically: yes, a structural conflict exists
Because:
As employees, they owe duties to their employer
As directors, they owe duties to the JV
Those interests will not always align
This is often called a “potential” or “situational” conflict, not an automatic breach.
Practically: this is extremely common
Most JVs are set up exactly like this:
Each shareholder appoints directors
Many of those directors are senior employees
Everyone knows they bring a shareholder perspective
Courts and regulators accept this reality — as long as it’s managed properly.
---
3. How this conflict is usually managed (and made lawful)
Well-drafted JV structures rely on several safeguards:
a) Disclosure
Employee-directors must:
Disclose their employment relationship
Disclose specific conflicts when they arise (e.g. a contract between JV and parent)
b) Recusal
When there’s a direct conflict (e.g. pricing, disputes, enforcement of shareholder rights):
The conflicted director may need to abstain from discussion or voting
c) Shareholder agreement protections
JV agreements often:
Explicitly allow nominee directors
Acknowledge their dual roles
Define when they can receive/share information with the parent
Set reserved matters requiring shareholder (not board) approval
d) Board composition balance
Having:
Independent directors, or
Equal representation from JV partners
reduces the risk that the board becomes a proxy battleground for parents.
---
4. What directors cannot do
Even with all the above, an employee-director cannot:
Advance the parent’s interests at the JV’s expense
Use JV information to benefit the parent improperly
Sabotage the JV to improve the parent’s negotiating position
Treat themselves as a “delegate” rather than an independent decision-maker
Courts are very clear on this point.
---
5. So are they “meant” to act against their employer if required?
Uncomfortably, yes.
If a genuine conflict arises:
The director must prioritise the JV
Or step aside from the decision
Or, in extreme cases, resign from one role
That tension is real, and it’s one reason JV boards can be tricky.
---
6. Why companies still do it anyway
Because employee-directors:
Understand the business deeply
Can move faster than independents
Ensure the shareholder’s investment is properly overseen
The legal system accepts this as long as governance is tight.
---
Bottom line
✔️ Yes, there is an inherent conflict risk
✔️ Yes, JV directors owe duties to the JV, not their employer
❌ No, this does not automatically make the arrangement improper or unlawful
✅ The key issue is how conflicts are disclosed and managed
