Therefore, the directors are expected to disclose the information with full care. An Independent Director is that member of the board of a company, who does not possess any financial relationship with the company except the sitting fees , nor can own shares in the company. Every time it is the Directors who are responsible in breaking Shareholders expectation and sometimes betraying the sentiments of stakeholders under a false veil of charisma, while using the corporate mechanism to fulfill personal welfare. A statute cannot specifically outline each and every act that a director must or must not do. Keeping the facts of this case in mind a director must ensure that even if a company is in a position where it does not have sufficient resources to take advantage of an opportunity, a director will not be excused if he diverts that specific opportunity to anyone else, including himself.
Subsequently, the entire business was taken over and each of the directors who had subscribed to the shares of the subsidiary company made a profit. Facts of the case: Regal Hastings Ltd owned a cinema and formed a subsidiary company to take a lease of two more cinemas. Their job description entails driving business growth by identifying opportunities, tracking new markets, and building sustainable client relationships. Their role also involves analyzing existing approaches to business development and recommending changes as may be required. No undue advantage should accrue to any director in the course of carrying out his duties. To safeguard the interests of the company, any member or members may bring a derivative action. Eisenberg, The Duty of Good Faith in Corporate Law, 31 Del.
By virtue of Section 170, the English Companies Act makes it clear that the director owes his duty to the company. Directors must act honestly and in bona fide. Understanding the concept of fiduciary relationship A fiduciary relationship is a relationship that puts someone in a position of trust, confidence and responsibility while acting on behalf and in the best interest of another person or persons. As a Director, one needs wide powers to help in advancing the organization. They monitor the activities of sales and marketing managers to ensure compliance with set standards and procedures for operation.
The prohibition will not apply if the company consents and consent meets the necessary formal requirements. This applies in particular to the exploitation of any property, information or opportunity, regardless of whether the company could take advantage of it. The Company Law Notes 4th ed. Some of the qualities required for success on this job include marketing and analytical skills, as well as leadership quality. The duty to avoid conflict of interests and ensure full disclosure is vested in the director. An alternate director may be appointed by the Board of Directors to act as a Director in absence for a period of not less than 3 months and not more than the allotted period for the director for whom the replacement is.
Therefore, the concept of fiduciary is used to encompass all such situations. This will be taken up by National Company Law Tribunal for expedited resolution for the shareholders. Bona fides cannot be the sole test, otherwise you might have a lunatic conducting the affairs of the company, and paying away its money with both hands in a manner perfectly bona fide yet perfectly irrational… It is for the directors to judge, provided it is a matter which is reasonably incidental to the carrying on of the business of the company… The law does not say that there are to be no cakes and ale, but there are to be no cakes and ale except such as are required for the benefit of the company. To avoid or minimise liability for wrongful trading, directors may have to cease trading. Differences between Directors and Officers While directors and officers have some similar duties, and in some corporations an individual can hold both positions, there are two significant characteristics officers have that directors do not.
The directors did not act honestly and in good faith. Imagine a director taking a decision in the board meeting which is beneficial to him on a personal basis but not to the company. At such times, the director must first discharge his duty of acting in good faith, and objectively consider the interests of the various stakeholders and arrive at a decision. In many countries there is also a statutory duty to declare interests in relation to any transactions, and the director can be fined for failing to make disclosure. Our guide provides directors with an overview of these fundamental duties. Like duty not to misappropriate with the companies opportunities which he has acquired at the time of his employment, that is whatever he should not misappropriate with any profit or any other thing which he has acquired in the name of the company for his own personal or economic benefit. These individuals may be held personally liable for such acts.
Only participation in meeting is no more enough, it also needs to be ensured all questions or expressed dissents are properly recorded in the minutes of the meeting, this is extremely important and is a pertinent evidence avoid the legal hassles at a later date. Another duty which he owns is not to disclose any confidential information which he has at the time before his resignation. It requires officers and directors to control and manage its affairs. Directors have extensive responsibilities and can be liable for breach. Post-independence, in the year 1956, the committee under the chairmanship of H C Bhaba recommended the Companies Act 1956 in the parliament, which came into effect from 1 st April 1956. With Shareholders revolution, it is a democracy in company affairs and the shareholders are the supreme power which appoints its ministry in the form of directors to run the show and make money for them.
A director must not only ensure to fulfill the statutory duties outlined by law but also the fiduciary duty which his position as an officer of a company demands. The board can change the mission, but only after careful deliberation. There is no convenient set of rules to determine which situations will or will not give rise or potentially give rise to a conflict of interest. However offences connected to fraud or intent to fraud are cognizable no warrant required for arrest. Breach of duties can result in penalties and, in serious cases, criminal prosecution and civil action against directors. Section 157 4 of the Singapore Companies Act This section is in addition to and not in derogation of any other written law or rule of law relating to the duty or liability of directors or officers of a company.