Representation of a Company Flashcards
Define a Director of a Company
A director is a member of the board of a company, the director may elect management teams. The director managers the affairs of the company on behalf of its shareholders.
State the requirements of a Director
a) To decide upon the policy, both present and future, which the company is to pursue and the strategy that it is to adopt.
b) To comply with all duties imposed upon them, as directors of the company, in terms of the Companies Act, and to accept the ultimate responsibility for the company’s due compliance with the various requirements of the Companies Act.
c) To delegate to the managing director or other chief executive officer the task of running the company.
d) To exercise an evaluative role in regard to the performance of the managing director and that of other executive directors.
e) Generally, to exercise an overriding control over the business of the company.
f) To act within their powers (which can be ascertained from the provisions of the Companies Act or from the articles of association) and to act in good faith for the benefit of the company as a whole.
Disqualification of a Director
Body Corporate
Minor
insolvent persons, persons with criminal records
Breaches of a directors duties
Conflict of interest
no profit rule
do not use inside information
The task of giving direction to the company involves:
- The formulation of policy
- The investigation of available opportunities to satisfy demand or to meeta need
- The forecasting of the probable outcome of different alternative lines of action and deciding upon the appropriate strategy
- The selection, from among the various alternatives open to the undertaking, of the particular objective(s) to be pursued
•T he establishment of goals, targets and standards to be met in the
achievement of those objectives.
BREACHES OF DIRECTORS’ FIDUCIARY DUTIES
Conflict of interests
The no-profit rule
Duty to not use inside information
Exceeding Limitations of Power
Failure to maintain and exercise an unfettered discretion
Failure to exercise his powers for the purpose for which they were conferred
NUMBER OF DIRECTORS
Section 66(1) of the Act requires that public companies and non-profit companies have at least three directors, whilst private companies and personal liability companies must have at least one.
The MOI can, however, set a higher limit to the number of directors required. The Act does not set an upper limit for directors – this will normally be determined by the MOI.
It may be mentioned that the JSE requires a minimum of four directors for listed companies.
DUTIES OF DIRECTORS
- To act in good faith, in what they believe to be the best interests of the company as a whole.
- To act with the degree of care, diligence and skill that may reasonably be expected from persons of their knowledge and experience.
- To act intra vires i.e. within the scope of their authority as prescribed by the memorandum and articles of association of the company.
- To act as a board.
AUTHORISED ACTS
A company, as a legal person, cannot itself perform juristic acts but must act through agents when concluding a contract. When dealing with outsiders, the fundamental common law principle applies, namely that person acting as the company agent must have the necessary authority to bind the company as principal to a contract.
Actual authority
Authorised acts by an agent indicate that the agent possesses actual authority and will bind his principal (the company) by means of his juristic acts. Actual authority may be conferred either expressly or by implication (tacitly). Whether authority has indeed been conferred (expressly or tacitly) remains, however, a question of fact.
Express authority
Express authority may be conferred either in writing or orally. The articles of a company will usually confer express authority on the board of directors to undertake the management of the company, for example, the board of directors may delegate such managerial powers to a managing director or a committee of the board of directors.
Tacit authority (implied authority)
Authority, which has been tacitly conferred, is a more difficult concept that often causes practical problems. The appointment of a person to a particular post in the company structure will often justify the inference that he possesses tacit authority to carry out acts of the kind that are normally associated with the holding of that particular office. However, it is important to note that the question of whether authority has, in fact been conferred, either expressly or tacitly, remains a question of fact that will, inter alia, depend on the conduct of the parties and the circumstances of each particular case.
Robinson v Randfontein Estates Gold Mining Co. Ltd., 1921 A.D. 168:
Where one man stands to another in a position of confidence, involving a duty to protect the interests of that other, he is not allowed to make a secret profit at the other’s expense, or place himself in a position where his interests conflict with his duty. If employed to buy, he cannot sell his own property; if employed to sell, he cannot buy his own property; nor can he make any profit from his agency save the agreed remuneration; all such profit belongs not to him, but to his principal. There is only one way by which such transaction can be validated, and that is by the free consent of the principal, following upon a full disclosure by the agent.
