Write 6 page essay on the topic Directors Duties.Download file to see previous pages... Directors exercise these powers by passing resolutions at board meetings.In the prevailing scenario where Wendy

Write 6 page essay on the topic Directors Duties.

Directors exercise these powers by passing resolutions at board meetings.

In the prevailing scenario where Wendy and Greg are directors of the block Ltd, there is a breach of directors' duties. Therefore the directors will be held liable for their acts. In this regard there is breach of:-

The directors' of a company are expected to perform their functions with reasonable care and attention. They must discharge their duties and obligations with skill and diligence as expected from a reasonable person of his knowledge and experience. They (directors) are however not liable for bonafide error of judgment as observed by Romer J. in Re City Equitable fire insurance company 3. In this case the company collapsed due to bad investments and bad debts and misappropriation caused by fraudulent acts of a director. The company suffered a loss to the tune of 1,200,000 are eventually was ordered to be would up. The director was convicted for his fraud and negligence. He was however acquitted in appeal because of an exception clause in the articles to hold directors liable only for gross negligence.

In Jorchester finance Co. Ltd v. ...

hat the duty of care extends uniformly to all directors whether they are executive on directors of a company were held liable for the loss caused to the company due to their negligence in signing blank cheques which enabled the executive directors to enter the amount as they pleased in those cheques

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3. Dr. H.V. Paranjape, Company law, 2000

4. Wardman, K. Abbott, Business law, 2001

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As regards the standard of care and skill expected from directors in performance of their duties, courts seem to unanimously agree that it is that of a reasonable person who with the same knowledge and experience would exercise in the situation. However, a distinction has been drawn between the standard of care and the standard of skill. For assessing a standard of care, the test of objective, while for the standard of skill is subjective.

In this regard Wendy and Greg never exercised duty of care and skill. We are told that at the general meeting they failed to take suggestions of Kirstein and other Shareholders who were concerned about the company's expansion yet there was a fall in apartment prices. Further Greg's order of 50,000 from Alfonzo was not in good faith since name of the directors or shareholders was informed of the loan. Therefore the two directors Wendy and Greg lacked the duty of skill and care towards the company.

b) Fiduciary Duties

The duties of good faith and honesty arising out of fiduciary the fiduciary relationship between the director and his company are analogous to those of a trustee.