Duties of Directors
DUTIES OF DIRECTORS
Directors of a company normally have exclusive power to manage the company’s business and exercise its powers. At common law, the duties were owed to the company, to employees, to individual shareholders and creditors.
1.0 Duties of Directors to the company
It is convenient to categorise the duties of directors into fiduciary duties which arise because they are quasi-trustees of the assets of the company. The word ‘fiduciary’ refers to trust and confidence. ‘A fiduciary is someone who has undertaken to act for or on behalf of another in a particular matter in circumstances which give rise to a relationship of trust and confidence’(Bristol and West Building Society v Mothew [1998] Ch1 per Millet LJ at p.18). Fiduciary duties of the directors of a company considered are imposed on them by equity for the protection of the persons for whom they act. Directors’ fiduciary duties are mandatory element of company law; they are imposed by the courts all directors of all companies. A director of a company holds an office not an employment, and is on duty all the time while holding the office: there are no off-duty hours when the director is free from his or her fiduciary duties (Gwembe Valley Development Co. Ltd v Koshy [1998] 2 BCLC 613) Some people argue that that is inappropriate to apply the concept of a fiduciary, which is derived from the concept of trustee, to company directors. Trustees are supposed to be prudent, risk-averse people whose priority is to preserve the capital value of trust assets whereas company directors are supposed to be risk-taking entrepreneurs.
2.0 Duties of Directors to Employees
Although in the past the duty of the directors to act for the benefit of the company has meant for the benefit of the shareholders of the company and not others, Section 144 of the 2001 Act states that Section 143 shall not limit the power of a director to make provision for the benefit of employees of the company in connection with; firstly,
Directors of a company normally have exclusive power to manage the company’s business and exercise its powers. At common law, the duties were owed to the company, to employees, to individual shareholders and creditors.
1.0 Duties of Directors to the company
It is convenient to categorise the duties of directors into fiduciary duties which arise because they are quasi-trustees of the assets of the company. The word ‘fiduciary’ refers to trust and confidence. ‘A fiduciary is someone who has undertaken to act for or on behalf of another in a particular matter in circumstances which give rise to a relationship of trust and confidence’(Bristol and West Building Society v Mothew [1998] Ch1 per Millet LJ at p.18). Fiduciary duties of the directors of a company considered are imposed on them by equity for the protection of the persons for whom they act. Directors’ fiduciary duties are mandatory element of company law; they are imposed by the courts all directors of all companies. A director of a company holds an office not an employment, and is on duty all the time while holding the office: there are no off-duty hours when the director is free from his or her fiduciary duties (Gwembe Valley Development Co. Ltd v Koshy [1998] 2 BCLC 613) Some people argue that that is inappropriate to apply the concept of a fiduciary, which is derived from the concept of trustee, to company directors. Trustees are supposed to be prudent, risk-averse people whose priority is to preserve the capital value of trust assets whereas company directors are supposed to be risk-taking entrepreneurs.
2.0 Duties of Directors to Employees
Although in the past the duty of the directors to act for the benefit of the company has meant for the benefit of the shareholders of the company and not others, Section 144 of the 2001 Act states that Section 143 shall not limit the power of a director to make provision for the benefit of employees of the company in connection with; firstly,