Corporate Management Responsibilities

Question 1

What are the 2 main qualifications of being a Director of a company?

Answer 1

1. Has to be a natural person (not company)

2. At least 18 years old (full legal capacity)

Question 2

Does the Director of a company require minimum education level?

Answer 2

No, however the constitution may require certain pre-requisite such as a minimum number of shares owned.

Question 3

What are the 2 different types of director?

Answer 3

1. Executive

2. Non- executive

Question 4

What are the duties of a Director?

Answer 4

1. Duty to avoid conflict of interest
2. Duty to act for proper purpose
3. Duty to act in the best interest of the company
4. Duty to act with due care, skill and diligence
5. Duties imposed by company act.
6. Duties imposed by securities and future act.

Question 5

What does it mean for a direct to avoid conflict of interest?

Answer 5

It means that a director should not place himself in a position where his duties to the company and his personal interest conflict.

Question 6

What does it mean for a director to act for proper purpose?

Answer 6

As a director, he is granted various powers. He should only use it for proper purposes. (e.g. power to issue new shares to raise money but use it to top a takeover bid.)

Question 7

What does it mean for a director to act in the best interest of the company?

Answer 7

This means that the director must act in the best interest of the company and not others. (e.g. giving wife pension is personal interest, not company’s interest)

Question 8

What does it mean for a director to act with due care, skill and diligence?

Answer 8

This means that the director must be detailed and responsible. e.g. Signing a cheque without checking the reason, hence the director is responsible for the losses

Question 9

What are the duties imposed by the company act?

Answer 9

1. When a company enters transaction and director has interest, he must declare direct/indirect interest
2. Director must act honestly and use reasonable diligence in the discharge of his duties
3. Company cannot enter certain transactions with director such as loaning him money
4. Any compensation has to be approved by the members
5. Any emoluments has to be approved by members

Question 10

What are the duties imposed by the securities and future act?

Answer 10

It is the prohibition of insider trading. If someone connected to corporation posses information that is not generally available, and this information is expected to have material impact on price or value of securities, he cannot sell, purchase, get from another person, enter into agreement, directly or indirectly communicate the information.

Question 11

What happens when a direct breach fiduciary duty?

Answer 11

The director may have to account for the profits he made, return any property he obtained in breach of the duties, or pay damage to the company for its losses.