Duties of directors - company management, Business Law and Ethics

Duties of Directors:

The duties of directors are usually considered under two broad headings, namely-

i. Duties of care and skill at common law, and

ii. Fiduciary duties as enunciated by courts of equity.

1. Duties of Care and Skill

The directors' duties of care and skill have been formulated in a series of cases brought against directors in order to make them liable in negligence for the manner in which they conducted the company's affairs. These duties were summarised by Romer, J. in RE CITY EQUITABLE FIRE INSURANCE CO LTD as follows:

i. A director need not exhibit in the performance of his duties a greater degree of skill than may reasonably be expected from a person of his knowledge and experience.

This rule prescribes a duty which is partly objective ( the standard of the reasonable man) and partly subjective (the reasonably man is deemed to have the knowledge and experience of the particular director). It may also be expressed by saying that, if a foolish director makes foolish decisions resulting in loss to the company, he cannot be liable for negligence. It would be unreasonable to expect a foolish director to make wise decisions. However, if the director made very foolish decisions resulting in loss to the company, he will be liable in negligence since it is not reasonable to expect a foolish director to make very foolish decisions. On the other hand, a wise director will be liable if he makes unwise decisions, since it is unreasonable to expect him, a wise man, to make unwise or foolish decisions.

Posted Date: 1/12/2013 4:51:06 AM | Location : United States







Related Discussions:- Duties of directors - company management, Assignment Help, Ask Question on Duties of directors - company management, Get Answer, Expert's Help, Duties of directors - company management Discussions

Write discussion on Duties of directors - company management
Your posts are moderated
Related Questions
Question 1 Consider you are the manager of a banking organisation. You find negligence Question 2 Explain the conflicts involved in decision making Question 3 Consider a

Advocates Whether in sec 3(1) of the Interpretation and General Provisions Act cap 2 and sec 2 of the Advocates Act (1989) an advocate is a person that whose name has been dul

Directors liability: This was fraudulent preference and the bank must repay the sums received. The directors' liability under their guarantee to the bank then revived. A paym


Recognition of disputes Recognition of disputes relates to a State not recognizing a certain dispute. However, if the whole world acknowledges a certain dispute then it is nece

Contracts illegal at the common law However a contract which is prohibited through the common law is frequently described as being as "contrary to public policy" as i.e. the c

Voluntary liquidation - shares of the minority: A company in (or about to go into) members' voluntary liquidation may by special resolution authorize the liquidator to sell th

Describe in detail about the - policy makers Elections are used to choose the policy makers, it is not the only mechanism. Since the authority to make decisions may be vested i

Insanity and Rejection - Termination of an Offer Insanity Furthermore the unsoundness of mind about either party before acceptance terminates the offer.  Hence the offe

QUESTION 1 (a) Why is it that businesses are increasingly exposed to scrutiny and criticisms? (b) Discuss four strategies which can be adopted to respond to these criticisms