Directors of proprietary companies who purchase shares from shareholders while in possession of material non-public information about the company's affairs — particularly pending negotiations for a sale of the company's undertaking — owe a fiduciary duty of disclosure to the selling shareholder. The rule in Percival v Wright that directors owe no fiduciary duty to shareholders when purchasing their shares is not followed in New South Wales. The duty arises from the director's position of advantage in possessing corporate information that the shareholder cannot access, and is particularly strong where the director is the sole effective director and the company has few shareholders.
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