Duties Of Directors Flashcards
1
Q
Duties
A
Sure, let’s break down the duties of directors as outlined in Section 204 of the Companies Act:
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Act According to the Articles:
- Directors must act in accordance with the company’s articles of association, which are the rules governing the company.
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Act in Good Faith:
- Directors should act in good faith to promote the company’s objectives for the benefit of its members (shareholders) as a whole.
- They should also act in the best interests of the company, its employees, shareholders, the community, and the environment.
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Care, Skill, and Diligence:
- Directors must perform their duties with due care, skill, and diligence.
- They should exercise independent judgment, meaning they should make decisions based on their own assessment rather than being influenced by others.
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Avoid Conflicts of Interest:
- Directors should avoid situations where they have a direct or indirect interest that conflicts, or may conflict, with the interests of the company.
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No Undue Gain:
- Directors should not seek to gain any undue advantage for themselves, their relatives, partners, or associates.
- If a director is found guilty of making any undue gain, they must repay that amount to the company.
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Non-Assignment of Office:
- Directors cannot assign their office to someone else. Any such assignment is void.
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Additional Duties:
- The Commission (regulatory authority) may specify additional duties and roles for directors.
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Breach of Duty:
- If a director breaches their duties, defaults, or is negligent in following the company’s articles, policies, or board decisions, this can be addressed by the company.
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Ratification:
- The company can ratify (approve) the director’s actions through a special resolution, which is a formal decision made by the shareholders.
- The Commission may also impose restrictions as necessary.
These duties ensure that directors act responsibly and in the best interests of the company and its stakeholders. They promote transparency, accountability, and ethical behavior, which are crucial for the company’s success and reputation.
If you have any specific questions or need further clarification on any point, feel free to ask!