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DUTIES AND LIABILITIES OF
DIRECTORS (1)
POSITION OF DIRECTORS
 DIRECTORS ARE :
- AGENTS
[Great Eastern Rly Co v Turner]
- OFFICERS
[s.2(1)]
- EMPLOYEES NOT SERVANTS
- TRUSTEES
[Re Forest of Dean Coal Co]
FUNCTION & POWER OF
DIRECTORS
 SECTION 211
- Business and affairs of the company
must be managed by or under the
direction of the BOD
- Power of managing
- Power of directing
- Power of supervising
TO WHOM THE DUTIES
ARE OWED
 To the company
 To whom?
 The significant groups in the company
 Shareholders and creditors
 What about employees?
PRIMARY DUTIES OF DIRECTORS
Cont.
1) Why a director is required to act in good faith?
- stands in a position of trust towards a
company
- Having a duty known as fiduciary
- This type of duty found in the a special
relationship of certain parties
2) Situation that does/does not amount to good
faith:
- Re W.M. Roith Ltd
- Marchesi v Barnes & Keogh
ACTING IN GOOD FAITH
IN THE BEST INTEREST OF
THE COMPANY AS A WHOLE
Cont.
3) How to act in good faith in the best
interest of the company? How did the
court determine the act that amount to
good faith?
- Re Smith and Fawcett Ltd
- Shuttleworth v Cox Bros & Co
(Maidendhead (Ltd)
USING POWER FOR A PROPER
PURPOSE
 The power entrusted to the director must be used
properly for the purpose for which the company
was formed
 Used in accordance with what has been set out in
the articles and memorandum
 Cannot use the power for any collateral purposes
 Case: Howard Smith v Ampol Petroleum Ltd
- acted in good faith alone is not enough if the
directors had exercised their powers for
collateral purposes
CONT
 A director is in breach of duty when he acts outside
the power despite the action is in good faith in the
best interest of the company
 Cases:
- Mills v Mills
- Kelapa Sawit (Telok Anson) Sdn Bhd v Dr Yeoh Kim
Leng & Ors
- Re Duomatic Ltd
- Section 223
- Section 224
- Section 225
- Section 226
- Section 227 etc
DO NOT BE IN A POSITION OF
CONFLICTING OF INTEREST
 Requirement of no conflict of interest is
one of the most important parts of the
duties of a director
 A director is not permitted to be in a
position where his duties to the company
and his personal interest conflict with one
another
 S. 218
DUTY OF DISCLOSURE
 It is a paramount duty of a director to
advance the interest of the company
rather than his own interest
 To perform the duty effectively, the
directors are required to disclose
whatever interest which might compete
with the interest of the company
 S.219
 S.221

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DIRECTORS' DUTIES (1).pdf

  • 1. DUTIES AND LIABILITIES OF DIRECTORS (1)
  • 2. POSITION OF DIRECTORS  DIRECTORS ARE : - AGENTS [Great Eastern Rly Co v Turner] - OFFICERS [s.2(1)] - EMPLOYEES NOT SERVANTS - TRUSTEES [Re Forest of Dean Coal Co]
  • 3. FUNCTION & POWER OF DIRECTORS  SECTION 211 - Business and affairs of the company must be managed by or under the direction of the BOD - Power of managing - Power of directing - Power of supervising
  • 4. TO WHOM THE DUTIES ARE OWED  To the company  To whom?  The significant groups in the company  Shareholders and creditors  What about employees?
  • 5. PRIMARY DUTIES OF DIRECTORS
  • 7. 1) Why a director is required to act in good faith? - stands in a position of trust towards a company - Having a duty known as fiduciary - This type of duty found in the a special relationship of certain parties 2) Situation that does/does not amount to good faith: - Re W.M. Roith Ltd - Marchesi v Barnes & Keogh ACTING IN GOOD FAITH IN THE BEST INTEREST OF THE COMPANY AS A WHOLE
  • 8. Cont. 3) How to act in good faith in the best interest of the company? How did the court determine the act that amount to good faith? - Re Smith and Fawcett Ltd - Shuttleworth v Cox Bros & Co (Maidendhead (Ltd)
  • 9. USING POWER FOR A PROPER PURPOSE  The power entrusted to the director must be used properly for the purpose for which the company was formed  Used in accordance with what has been set out in the articles and memorandum  Cannot use the power for any collateral purposes  Case: Howard Smith v Ampol Petroleum Ltd - acted in good faith alone is not enough if the directors had exercised their powers for collateral purposes
  • 10. CONT  A director is in breach of duty when he acts outside the power despite the action is in good faith in the best interest of the company  Cases: - Mills v Mills - Kelapa Sawit (Telok Anson) Sdn Bhd v Dr Yeoh Kim Leng & Ors - Re Duomatic Ltd - Section 223 - Section 224 - Section 225 - Section 226 - Section 227 etc
  • 11. DO NOT BE IN A POSITION OF CONFLICTING OF INTEREST  Requirement of no conflict of interest is one of the most important parts of the duties of a director  A director is not permitted to be in a position where his duties to the company and his personal interest conflict with one another  S. 218
  • 12. DUTY OF DISCLOSURE  It is a paramount duty of a director to advance the interest of the company rather than his own interest  To perform the duty effectively, the directors are required to disclose whatever interest which might compete with the interest of the company  S.219  S.221