Scribd
Upload
14 views3 pages

Duties of Directors

Uploaded by

Anthony Yawson
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
14 views3 pages

Duties of Directors

Uploaded by

Anthony Yawson
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
You are on page 1/ 3

Duties of Directors DADA AFA

Consider the relevance of the fiduciary duties of directors under the


Companies Act, 1963 (Act 179).

The fiduciary duty of a director refers to the duty of the director to observe good
faith in relation to the company. This has been given statutory backing in section
203 of the Act.

The law is that directors stand in fiduciary relationships with the company and
must observe utmost good faith. This principle was illustrated in the case of
Commodore v Fruit Supply Ltd. Here the Court of Appeal held that a director
occupied a fiduciary relationship and therefore was precluded from entering into a
binding transaction on behalf of the company in which he himself had a personal
interest which conflicted with the interests of the company.

The duty to act in good faith involves a requirement that the directors should act
as honest men would in the conduct of their affairs. To this extent, the duty
involves a subjective test.

Directors are to act in the best interest of the company. Concerning what amounts
to the best interest of the company, the court has had the opportunity to
pronounce on this in the case of Smith v Fawcett. Here, the court held that
whether a director is deemed to have acted in the best interest of the company in
the exercise of discretionary power is what the director considers to be the best
interest of the company and not what the court considers to be the best interest of
the company

Under no circumstance can it be said that a director who sets up a rival company
is acting in the best interest of the first company unless he discloses this to the
first company. This was the holding in Asafu Adjaye v Agyekum.

A director is to promote the purposes for which it was formed, and in the manner
that a faithful, diligent, careful and ordinarily skilful director would act in the
circumstances.

There are two tests for determining the degree of skill of a director: subjective and
objective tests.
Duties of Directors DADA AFA

The subjective test is dependent on the level of expertise and quality training that
the director himself had. Thus, he will be judged based on his own background and
not any persons’ background. Case for reference are Re City Fire Equity
Insurance Company and Re D’Jam of London.

The objective test takes the degree of skill that would have been exercised by a
reasonably diligent person, the general knowledge that may be reasonably
expected of a person carrying out the same functions that the director under
examination carries. This test was adopted in Cudjoe v Conte Limited

A director under common law is not to make secret profits or take bribes. The well-
known authority in support of this proposition is Boston Deep Sea Fishing and
Ice Co v. Ansell. In that case the defendant was the managing director of the
plaintiff company. He contracted on behalf of the company for the construction of
certain fishing-smacks, and, unknown to the company, took a commission from
the shipbuilders. The defendant was also a shareholder in an ice company and a
fish carrying company which paid, in addition to the ordinary dividends, bonuses to
shareholders who were owners of fishing-smacks and employed the companies.
The defendant employed these companies for the plaintiff’s smacks but received
the bonuses for himself. It was held that the receipt of the commission from the
shipbuilding company was a good ground for the dismissal of the defendant from
office and that he had to account to the plaintiff company, for the bonuses received
from the ice and fish carrying companies.

There is a duty devolved on a director in section 204 not to exceed powers


conferred on him/her without an approval of the company.

The law is that the directors shall not, without the approval of an ordinary
resolution of the company, exceed the powers conferred on them by this Act and
the company’s Regulations or exercise those powers for a purpose different from
that for which those powers were conferred although they may believe the exercise
to be in the best interests of the company.

A director also has a duty under section 205 to avoid a conflict of interests with
the company. The principle is that a director is prohibited from placing himself in a
Duties of Directors DADA AFA

position in which his duty to the company conflicts or may conflict with his
personal interests or his duties to other persons.

The law carves out liabilities for directors that have breached their common law or
statutory duties.

Section 209 of Act 179 is to the effect that where a director commits a breach of
duty under sections 203 to 205,

(a) the director and any other person who knowingly participated in the breach is
liable to compensate the company for the loss it suffers as a result of the breach;

(b) the director shall account to the company for a profit made by the director as a
result of the breach; and

(c) a contract or any other transaction entered into between the director and the
company in breach of that duty may be rescinded by the company.

You might also like

pFad - Phonifier reborn

Pfad - The Proxy pFad of © 2024 Garber Painting. All rights reserved.

Note: This service is not intended for secure transactions such as banking, social media, email, or purchasing. Use at your own risk. We assume no liability whatsoever for broken pages.


Alternative Proxies:

Alternative Proxy

pFad Proxy

pFad v3 Proxy

pFad v4 Proxy