DIRECTORS

- POWERS AND RIGHTS

• The articles may specify a higher number than the minimum number
of directors specified in subsection
• The board of directors may, where there are less directors than the
minimum number prescribed in this section, subject to ratification at
the next general meeting of the company, appoint a person to be a
director.
POWERS OF DIRECTORS
• A company may adopt the Standard Articles set out in the Schedules
or any specified regulation in the CA Act, 2017.
• The powers of the Directors are set out in a company’s constitution.
• Directors may exercise all the powers of the company as set out the
standard Articles.
POWERS OF DIRECTORS
• However the powers set out in the Standard Articles are subject to:
- The provisions of the Law
- The requirements of any other elements of the company’s
constitution
- Any Directions given to them by a “special resolution” of the
shareholders voting in general meeting of the company, to the extent
that the shareholders have the right to make any such resolution.
POWERS OF DIRECTORS
• The powers are given to the board of directors as a whole.
• Subject to the CA Act 2017, the business of a company shall be
managed by, or under the direction or supervision of, a board of
directors who may—
a. pay all expenses incurred in promoting and forming the
company; and
b. exercise all such powers of the company as are not, by the Act or
the articles, required to be exercised by the members.
DELEGATING POWERS OF BOARD
• The CA Act 2017 states that the Powers of the board can be delegated
• The Board may delegate powers to a director or a committee
comprising one or more directors.
• The board may also delegate to any executive director, such as a
Managing Director, such of its powers that it considers desirable for
that director to exercise.
• However, a board of directors that delegates any power, shall be
responsible for the exercise of that power, as if the power had been
exercised by the board itself.
BORROWING POWERS
• Subject to the articles, the board of directors may exercise the powers
of the company to—
a. borrow money;
b. charge any property or business of the company, including any of its
uncalled capital; and
c. issue debentures or give any other security for a debt, liability or
obligation of the company or of any other person.
• Therefore, directors can put the investment of shareholders at risk by
borrowing more than the company can safely afford.
DUTIES OF DIRECTORS TO THEIR
COMPANY
• Directors are Agents of the company.
• Directors’ duties are to the company, but not to its shareholders.
• Nor its employees.
• Or any person external to the company, such as the general public.
• Ideally, Directors are should to owe a duty to their shareholders and
possibly to the company’s employees. But, this is not the case!
• Accountability and Responsibility should not be confused with Duty.
DUTIES OF DIRECTORS TO THEIR
COMPANY

• Director have a responsibility to use their powers in ways that seem best
for the company and its shareholders.
• Directors should be accountable to the owners of the company for the
ways in which they have exercised their powers.
• Directors should also be accountable for the performance of the company.
• Instead, Directors have duties to the company.
• A director shall not act, or agree to the company acting, in a manner that
contravenes the CA Act, 2017 or the Articles.
GENERAL RESPONSIBILITIES OF
DIRECTORS
• Subject to the CA Act 2017, a director shall—
a. take necessary measures to prevent, reduce and manage any
attendant risks to the business of the company;
b. not cause, allow or agree for the business of the company to be
conducted in a manner that is likely to create a substantial risk of
serious loss to a member or creditor of the company; and
c. when exercising powers or performing duties of a director—
i) act in good faith and in the best interests of the company;
GENERAL RESPONSIBILITIES OF
DIRECTORS
ii) exercise the degree of care, diligence and skill that may reasonably
be expected of a person carrying out the functions of a director.
FIDUCIARY DUTIES OF DIRECTORS
• Fiduciary duty: Means a duty of a trustee.
• The directors of a company are given their powers in trust by the
company, and have fiduciary duties towards the company.
• However, these are duties to the company, and not to its
shareholders.
• In line with the CA Act 2017, A director shall—
a. exercise that director’s power—
i) in accordance with this Act and act within the articles; and
FIDUCIARY DUTIES OF DIRECTORS
ii) for the purpose for which the power is conferred;
b. promote the success of the company;
c. exercise independent judgment; and
d. disclose information about that director’s remuneration in the financial
statements of the company.
• If a director were to act in breach of his fiduciary duty, legal action could
be brought against him/her by the company.
• In such situation, the “company” could be represented by a majority of
the board of directors, or a majority of shareholders, or a single
controlling shareholder.
TESTS FOR BREACH OF FIDUCIARY
DUTY
There are 3key tests of whether a director is in breach of his fiduciary duties in
carrying out a particular transaction or series of transactions:
1. The transaction should be reasonably incidental to the business of the
company. If it is not related to the business of the company in any way, it
would be in breach of the fiduciary duty.
2. The transaction carried out should have been “bona fide,” – which means in
good faith, with honesty and sincerity. If it is not, it would be a breach of
fiduciary duty.
3. The transaction should also have been made for the benefit of the
company, and not for personal benefit of the director.
4. The director has a fiduciary duty to avoid a conflict of interest.
DUTY TO AVOID CONFLICT OF
INTEREST
• A director shall avoid a situation in which that director has, or is likely to have,
a direct or indirect interest that conflicts, or is likely to conflict, with the
interests of the company.
• In particular, to the exploitation of any property, information or opportunity,
whether or not the company takes advantage of the property, information or
opportunity.
• The duty to avoid a conflict of interest shall not be considered to be infringed
if the—
a. Situation cannot reasonably be regarded as likely to give rise to a conflict of
interest; or
b. Matter has been authorized by the board of directors.
A DIRECTOR’S DUTY OF SKILL AND
CARE
• In addition to having a fiduciary duty, a director may also have a duty of skill
and care to the company.
• A duty of “skill and care” is a duty owed by a director to the company. A
question can be raised about what level of skill and care should be expected
from a director.
• A director should not act negligently in carrying out his/her duties, and
could be personally liable for losses suffered by the company as a
consequence of such negligence.
• The standard of skill and care expected of a director is the higher of the skill
that s/he has or the skill that would objectively be expected of a director of
the particular company.
DUTIES OF DIRECTORS AND
DELEGATION
• Since directors owe a duty of skill and care to the company, it could
be asked how much time and attention a director should give to the
company’s affairs.
• To what extent should a director delegate responsibilities to another
person without being in breach of his duties.
• In a known case in the UK, the summary of the duties of a director
with regard to functions that were delegated is:
1. directors, both individually and collectively, have a duty to acquire
and maintain sufficient understanding of the company’s business to
enable them to discharge their duties properly.
DUTIES OF DIRECTORS AND
DELEGATION
2. Subject to the Articles of Association, directors are allowed to
delegate particular functions to their subordinates whose competences
and integrity they trust.
3.There is no universal rule for establishing whether a director is in
breach of his/her duty to supervise the discharge of delegated
functions by subordinates.
The extent of the duty, and whether it has been properly discharged,
should be decided on the facts of each a case.
Duty not to accept third Party benefits

According to the CA Act, 2017 regarding Duty not to accept third party
benefits:
1. A director shall not accept a benefit from a third party, conferred by
reason of—
a. being a director of the company; or
b. doing or not doing anything as a director of the company.
2. Benefits received by a director from a person by whom that
director’s services as a director or otherwise are provided to the
company shall not be regarded as conferred by a third party.
Duty not to accept third Party benefits
3. The duty not to accept third party benefits, in accordance with this
section of the Act, shall not be considered to have been infringed if the
acceptance of the benefit does not give rise to a conflict of interest.
4. In this section of the Act, “third party” means a person other than a
body corporate or a person acting on behalf of the body corporate.
RELATED PARTY TRANSACTIONS
1. A director shall, if interested in a transaction or proposed transaction
with the company:
a. cause to be entered in the interests register and disclose to the
board—
i) the nature and monetary value of the director’s interest where the
monetary value of that interest is quantifiable; or
ii) where the monetary value of the director’s interest cannot be
quantified, the nature and extent of that interest; and
RELATED PARTY TRANSACTIONS
b. not vote on a matter relating to the transaction.
2. A failure by a director to comply with subsection (1) (a), may not
affect the validity of a transaction entered into by the company or the
director, if the other party was not aware of the director’s interest.
3. Where a director with an interest in a matter votes on it the vote
shall be null and void.
4. A director who fails to comply with subsection (1) (a) commits an
offence.
END