Slide Business Law
DUTIES OF DIRECTOR
Introduction
Duties and liabilities are imposed on officers of a company, including directors, both by common law and statute.
Thus, directors owe their companies fiduciary duties at common law.
These duties are further supplemented by the Act.
Officer –section 4(1)
FD duty of care skill and diligence statutory duty
The fiduciary duties of directors may be conveniently examined under the following categories. Director owe a duty to:
Act bona fide and in the interests of the company as a whole;
Use powers for their proper purposes
Avoid conflic of interests; and
What is fiduciary?
A fiduciary relationship is the relationship between a person in a position of trust, the fiduciary, and the person for whose benefit the fiduciary acts
A fiduciary’s powers are exercised on behalf of others who are in a position of dependance.
1. Duty to act bona fide in the best interest of the company
The general rule regarding exercise of directors’ power was expressed in Re Smith and Fawcett Ltd (1942) Ch 304 where a director is required to act bona fide in the interest of a company, he must act according to what he considers, not what a court may consider, is in the interest of the company :
The directors are the ones to determine what is best for the company.
The duty to act bona fide in the interests of the company is subjective duty. There is no breach where the directors act in what they honestly believe to be in the interests of the company.
The courts are generally reluctant to override the business judgment of directors.
Directors are presumed to have acted bona fide for the benefit of their company and those persons alleging a breach of duty bear the onus of proving that this is in fact not the case.
To whom is a fiduciary duty owed?
Duty to the company
Directors of a company are in fiduciary relationship to the company and that, as a consequence of their status as fiduciaries, directors owe a duty to act in
Introduction
Duties and liabilities are imposed on officers of a company, including directors, both by common law and statute.
Thus, directors owe their companies fiduciary duties at common law.
These duties are further supplemented by the Act.
Officer –section 4(1)
FD duty of care skill and diligence statutory duty
The fiduciary duties of directors may be conveniently examined under the following categories. Director owe a duty to:
Act bona fide and in the interests of the company as a whole;
Use powers for their proper purposes
Avoid conflic of interests; and
What is fiduciary?
A fiduciary relationship is the relationship between a person in a position of trust, the fiduciary, and the person for whose benefit the fiduciary acts
A fiduciary’s powers are exercised on behalf of others who are in a position of dependance.
1. Duty to act bona fide in the best interest of the company
The general rule regarding exercise of directors’ power was expressed in Re Smith and Fawcett Ltd (1942) Ch 304 where a director is required to act bona fide in the interest of a company, he must act according to what he considers, not what a court may consider, is in the interest of the company :
The directors are the ones to determine what is best for the company.
The duty to act bona fide in the interests of the company is subjective duty. There is no breach where the directors act in what they honestly believe to be in the interests of the company.
The courts are generally reluctant to override the business judgment of directors.
Directors are presumed to have acted bona fide for the benefit of their company and those persons alleging a breach of duty bear the onus of proving that this is in fact not the case.
To whom is a fiduciary duty owed?
Duty to the company
Directors of a company are in fiduciary relationship to the company and that, as a consequence of their status as fiduciaries, directors owe a duty to act in