Breach of Fiduciary Duty of Director Essay Example
Breach of Fiduciary duty of director
According to S.4(1) of Companies Act (CA) 1965, director includes any person occupying the position of director of a corporation by whatever name called and includes a person in accordance with those directions or instructions the directors of a corporation are accustomed to act and an alternate or substitute director. Directors have a fiduciary duty to the company which is duty to act in good faith in best interest of the company and act for a proper purpose. In the case of Re Smith and Faweett Ltd [1942] 1 All ER 542, it established that a director must act bona fide in the interest of the company. Furthermore, under S.132(1) of CA 1965, it states that a director of a company must exercise his power at all the times for a proper purpose and in good faith in the best interest of the company.
In S.132(2) of CA 1965, improper use of company’s property, position, corporate opportunity or competing with the company is prohibited. ‘Improper use’ is to gain directly, a benefit for himself or any other person, or cause detriment to the company. It also provides that director should obtain the prior consent of the members at a general meeting before acting on the information. If the director fails to obtain the approval, he should attempt to obtain the members’ ratification at a general meeting.
A director will not be enabling to take the corporate opportunity if the company is unable to take it. The fact that the company itself could not get the corporate opportunity is irrelevant. A director who does so will be liable for breach of duty as shown in the case of Regal (Hastings) LTD v Gulliver [1967] 2 AC 134. Yet, it is irrelevant that the company did not incur any losses due to the breach of duty of the director.
Besides that, a director is considered as breach of duty even if he resigns to take up corporate opportunity if his resignation was prompted by a desire to acquire the opportunity sought by the company or it was the
According to S.4(1) of Companies Act (CA) 1965, director includes any person occupying the position of director of a corporation by whatever name called and includes a person in accordance with those directions or instructions the directors of a corporation are accustomed to act and an alternate or substitute director. Directors have a fiduciary duty to the company which is duty to act in good faith in best interest of the company and act for a proper purpose. In the case of Re Smith and Faweett Ltd [1942] 1 All ER 542, it established that a director must act bona fide in the interest of the company. Furthermore, under S.132(1) of CA 1965, it states that a director of a company must exercise his power at all the times for a proper purpose and in good faith in the best interest of the company.
In S.132(2) of CA 1965, improper use of company’s property, position, corporate opportunity or competing with the company is prohibited. ‘Improper use’ is to gain directly, a benefit for himself or any other person, or cause detriment to the company. It also provides that director should obtain the prior consent of the members at a general meeting before acting on the information. If the director fails to obtain the approval, he should attempt to obtain the members’ ratification at a general meeting.
A director will not be enabling to take the corporate opportunity if the company is unable to take it. The fact that the company itself could not get the corporate opportunity is irrelevant. A director who does so will be liable for breach of duty as shown in the case of Regal (Hastings) LTD v Gulliver [1967] 2 AC 134. Yet, it is irrelevant that the company did not incur any losses due to the breach of duty of the director.
Besides that, a director is considered as breach of duty even if he resigns to take up corporate opportunity if his resignation was prompted by a desire to acquire the opportunity sought by the company or it was the