Article Reflection
Introduction
If a company is likened to a small democratic nation, then its directors are its government. Once elected and in control, the directors have almost total power over the operation of the company until they are removed. Therefore, duties must be given to directors, to ensure they act in the proper manner.
Fiduciary Duties
Section 131 of the Companies Act 1993 discusses the duty a director has, to act in good faith and in the best interests of the company.
The fiduciary duties of directories have been clearly formulated from the cases of Pacifica Shipping Co Ltd v Andersen[1](where Andersen [the director of Pacifica Shipping Company Limited] took a deferred opportunity of the company for himself) and Canadian Aero Service Ltd v O’Malley[2]. They were restated in Kawhia Offshore Services Limited v Rutherford[3] where Rutherford (the director of Kawhia Offshore Services Limited) took a maturing business opportunity for himself. Although Kawhia was unlikely to succeed in the opportunity, Rutherford owed a duty to not allow his personal interests to conflict with the company’s interests of retaining the opportunity.
Director’s duties can be summarised into four duties: the duty of good faith, the duty to avoid conflict, the duty not to profit from the company and the duty not to misuse the company’s confidential information. In addition, any profits that the director comes into (by use of the company information, resources, or property) are deemed to be that of the company. Directors are given a position of authority and responsibility. They must adhere to the rules of their position and not misuse their power as a director.
Kuwait Asia Bank v National Mutual Life Nominees Ltd[4] clarified the duty regarding nominee directors. It was held that the overall duty lay with the company that the nominees were directing, rather than the nominating company.
Holden v Architectural Finishes Ltd[5] a) Duty of good faith to act as the director
If a company is likened to a small democratic nation, then its directors are its government. Once elected and in control, the directors have almost total power over the operation of the company until they are removed. Therefore, duties must be given to directors, to ensure they act in the proper manner.
Fiduciary Duties
Section 131 of the Companies Act 1993 discusses the duty a director has, to act in good faith and in the best interests of the company.
The fiduciary duties of directories have been clearly formulated from the cases of Pacifica Shipping Co Ltd v Andersen[1](where Andersen [the director of Pacifica Shipping Company Limited] took a deferred opportunity of the company for himself) and Canadian Aero Service Ltd v O’Malley[2]. They were restated in Kawhia Offshore Services Limited v Rutherford[3] where Rutherford (the director of Kawhia Offshore Services Limited) took a maturing business opportunity for himself. Although Kawhia was unlikely to succeed in the opportunity, Rutherford owed a duty to not allow his personal interests to conflict with the company’s interests of retaining the opportunity.
Director’s duties can be summarised into four duties: the duty of good faith, the duty to avoid conflict, the duty not to profit from the company and the duty not to misuse the company’s confidential information. In addition, any profits that the director comes into (by use of the company information, resources, or property) are deemed to be that of the company. Directors are given a position of authority and responsibility. They must adhere to the rules of their position and not misuse their power as a director.
Kuwait Asia Bank v National Mutual Life Nominees Ltd[4] clarified the duty regarding nominee directors. It was held that the overall duty lay with the company that the nominees were directing, rather than the nominating company.
Holden v Architectural Finishes Ltd[5] a) Duty of good faith to act as the director