Director – A Bankrupt

 

Directors’ duties and liabilities in a company 

 

Where does he gets he power from?
The directors powers and duties are stated in the articles of association and also the board where the power of management lies. 

 

What are the minimum number of directors required to form a limited company?
A minimum of two person is required. sec 122 of the Companies act. 

 

How do we define the directors roles and duties?
Generally, there are fiduciary duties, duties of skill, care and diligence and statutory duties. Note s132(1) of the Companies act also state the word ‘honestly’. This creates an element of subectivity.

 

What is conflict of interest of a director?
This is a rather important section and will discuss separately – see other chapters.

 

Fiduciary duties – define further?
generally, a director must act in the interest of the company. Interest of the company is again a subjective element – and to how far it can mean is anyone’s guess. For example, director make donations to a charitable institution, does it mean he is not acting in the interest of the company, since the company surely will not benefit anything from the donation and definitely not commercially justifiable.

 

What is ‘commercially justifiable’ – the modern view?
it shall not mean that profits have to be maximised at all times but so long that there are other types of intangible benefits, it may be sufficient.

 

We have said above that a director’s must act in the company’s  interest? who’s interst is it?
It usually means the members/shareholders.

 

How about the interest of the creditor?
This is important as many directors of a company, after realizing that their company may be under liquidation, the company may make certain decisions of the company not in the interest of the company and definitely not in the interest of the creditor as when they appoint a receiver/manager onto the board, they would have realized that there are monies which have made out, for example return of advancement by the directors/shareholders first, assets of the company may be sold (though creditors have remedies to recover though the law) and some money (substantial) have been sifen off. Therefore, if a breach can be found, the director may be personally liable for any acts/conducts by him.

 

Any case law to support that the creditor can sue the director personally as a constructive trustee for the sum/asset sifen off?
In case of Kuwait Asia Bank EC v National Mutual Life Nominees Ltd (1990) 3 WLR 297.

 

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