157. As to the duty and liability of officers Flashcards
- As to the duty and liability of officers
General overview
[157.01] This section encapsulates the common law duty of a director in statute form. Basically, it provides that a director has to act honestly and exercise reasonable diligence in the discharge of his office. It provides for a criminal sanction for breach of the section. Generally, the section is taken to mean that the director should act in good faith and with care, skill and diligence. In the Report of the Steering Committee for Review of the Companies Act, April 2011, Chapter 1, paras 143–146, the Steering Committee discussed the need to extend the duty under s 157 to the chief executive officer or other officers of the company but decided against it. As a result, there seems to be a conundrum where s 157(1) codifies the fiduciary duty of good faith, honesty and reasonable diligence of directors (but does not extend it to “officers”) whilst the duty under s 157(2) not to make improper use of information applies to an “officer or agent”, which is a wider ambit. An “officer or agent” includes, inter alia, a person employed in an executive capacity by the corporation, which would clearly encompass the chief executive officer of the corporation: s 4. Hence, s 157(1) applies to a director only but s 157(2) applies to directors and the chief executive officer of the corporation, and senior management employees.
