COMPANY DIRECTORS: POWERS AND DUTIES 7
CompanyDirectors: Powers and Duties
CompanyDirectors: Powers and Duties
Acompany director is essentially in charge of the performance of anorganization or a company. This main responsibility is primarilystated by the board in general to essentially implement and monitorthe company’s strategic policies as well as its objectives(Griffiths & Loose, 2008). The directors have main defined dutiesto the shareholders of the company as well as to the company itselfby the effectively accounting of all activities. There are companiesthat have many directors in their organizations who are spreadthroughout the different varying roles and defined organizationalfunctions. However, it`s important to have the knowledge that anycompany aspiring to have directors is advised to have a singlenatural director (City Law, 2014). When a company employs thisnatural director there is no limit of the appointment of the power ofcorporations. However, a public company must employ at least twocompany directors, while a private company a single company director.
Thedirector is expected to report the performance of the company to theboard of directors or the chairman of the company (Keay, 2007). Thisis an essential function that ensures that a company sticks all itsoperations to meet the set goals and objectives. However, it isimportant to note that not all companies contain these directors.There are some large companies, for instance, that have deputydirectors as well as assistant directors who assist the main companydirectors in discharging the set duties and responsibilities. Thecompany directors are placed at the lowest levels of the executiveorder on the company (City Law, 2014). Moreover the title ofassociate directors is employed by many large organizations. Theorganizations that use locations as the main managerial structuraldepartmental system use the title of regional directors. Theseparticular directors are typically in charge of those particularregions or area.
Directors are anticipated to strictly adhere to the specified powersof the company constitution to act only for proper purposes (LawCommission, 2013). Acting proper entails making sound investmentdecisions that are entirely aimed at making the organization moreprofitable. For instance, in cases of financial difficulties thedirector is expected to come up with new decisions that mainly aimedat raising the financial position of a company (Keay, 2007). It is,however strictly prohibited for a company director to divert suchinvestment decisions to fulfill their own personal interests. Thereare existing jurisdictions that allow the members of any organizationto rectify such transactions that have negative repercussions in thecompany’s financial position.
Moreovera director is expected to put into effect practical skills, care anddiligence when discharging their duties (Keay, 2007). It is expectedthat there is a high level of learning skills that are exhibited bythe director. This is a typical law prerequisite subject that ismeant to examine the reasonableness of the director. However, thisexamination is partially subjective. The 2006 company act expects thedirector to put on view the skills, care and diligence discharged bya reasonable individual carrying similar functions. The act furthertakes into consideration the director’s skills, knowledge andexperience that he already possesses. It is expected that a directorwho has more experience will have to display greater heights ofskills, care and diligence that meet the expected standards(Griffiths & Loose, 2008).
A director has the functions of resolving any conflicts of intereststhat may arise in the company or organizations. There is a provisionin the 2006 Act that deals with any conflict of interest that arisesin any company (City law, 2014). A private company director ischarged with disclosing any probable conflict to other fellowdirectors. The fellow directors may then authorize for thetransaction to be effected after a generous review (Law Commission,2013). However, the clause that indicates that the director’s rightto do so may be removed by the company by including a suitable clausein the article. In a public company, however the conflict of interestis usually referred to the board of director, if the constitutionharbors a specific provision for such an authority.
In addition a director is expected to act and exercise independentjudgment that is aimed to fulfill the interests of the company (Keay,2007). This particular act is an act of good faith that exemplifiesthe general duty of a company director. It is strongly opposed to ageneral director to act under the instructions and interests of athird party. It would be considered as a breach of duty if anydirector acts in this particular manner (City Law, 2014). However,if any director does so, he is expected to display beyond areasonable doubt that they had an independent judgment in following athird party’s instructions. This party exception is offered to anycompany director who is normally appointed by the said third party.In this regard the company director must ensure that independentjudgment is exercised to ensure that the company’s interests areabove those of the third party.
Itis paramount to state in the executive order of any company,directors fall in the lowest level, thus are entrusted to promote thecompany’s success (Keay, 2007). It is the duty of the director tomake all viable decisions that would have a beneficial consequence inthe long run. Such decisions involve participating in making soundinvestment decisions that ensures the company or the organizationremains profitable. The company director safeguards the company’sinterests and ensures that all activities are geared towards meetingthe company’s goals and ambitions. It is also the role of thedirector to safe guide and protect employee interests (Griffiths &Loose, 2008). This is by ensuring all employees’ benefits as wellas their personal interests are taking care of by the environmentthey work in.
Fiduciaryduties have been established by the court’s day to day businessdecisions. They are found in the statutes as well as being elementsof the common law. Within these duties the director is expected tofunction within the boundaries of the described powers. Hence it istherefore very important that a director acts and exercises powersover the duties that are laid down for him to do so. Moreover, it isa company director must be sufficient in handling interpersonalrelationships between employees. In so doing, he it is required tominimize or completely avert any form of conflict that may arise. Thefiduciary duties have also laid down the assertion of fully engagingand integrating the players in indulging in all activities that aredeemed viable and profitable for the company (Law Commission, 2013).
Thedirectors have an invaluable duty of care to the shareholders. Theduty of care expects the directors to make business decisions thatsolely based on exhausted available material information (Keay,2007). They are further expected to act in an informed and in adeliberate approach. The directors place the company’s interestsforward by acting in good faith. Moreover the company directors areregarded to have made all investment decisions after exhausting allavailable investment options. The rule of care determines whethercompany directors acted in a reasonable manner that any reasonableperson could have acted the same way (Law Commission). It alsodetermines whether the company director acted in good faith. If anycompany directors acted in such manners, then that person would notbe held liable for any wrong business decisions if unfavorableoutcomes are experienced by the company.
Companydirectors have a duty to the shareholders of protecting andsafeguarding the assets and interests of the company (Griffiths &Loose, 2008). The directors are hence expected to refrain from anyactivities or decisions that may injure the company’s interests andprofits. In addition, they are bound to refrain from conflicts ofself-interests and their duty. They are bound to give undividedallegiance to the company and its interests.
CityLaw School. (2014). CompanyLaw in Practice.London. City Law School
Griffins,M, & Loose, P. (2008).TheCompany Director: Power, Duties and Liabilities.London. Jordan’s Publication.
Keay,A. (2007). CompanyDirectors’ Responsibilities to creditors and Shareholders.New York. Routledge Publishers
LawCommission. (2013).Fiduciary Duties of Investment.Great Britain. Law Commission.