Professional Documents
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law
Statutory duties
Remedies for breach of duties
A.
B.
C.
I.
II. To
III.To
Act bona
fide in the
interest of
the
Company
and
Exercise
powers for
proper
purpose
I.
The interest of the co. that the directors have to consider has
traditionally meant:
i.
ii.
iii.
They are not allowed to improperly obtain profit out of their position as
directors. Aberdeen Railway Co. v Blaikie Bros. [1854] 1 Macq
461; House of Lords held that the co could avoid the contract where
one of the partners of the firm the co had contracted with, was a
director of the co at the time of the contract even if it was made on fair
terms.
a) compete
b) contract
c) use
a.
b.
c.
d.
Duties to avoid
Conflict of Interests
under
S.132(2)
Law of Assoc II/ Z.Elias
Comment:
This new provision amounts to a restatement of the
common law conflict of interest situation.
Common Law
Duties of Care, Skill and
Diligence
and
2007 amendment
Section 132(1A)
Old law
The duty to act with care and skill is derived from common law.
1.
Comments:
2.
6.
S.132(1B)
Business Judgment
Rule
Old law
i) Sections 131, 132C, 132D, 132E, 133, 133A, provide
for sanctions that follow if a director breaches his duties.
ii)
Section 132(1B)
Comments :
S.132(1B)
What is Business Judgment?
1.
2. Return of Property
The co may seek a declaration that a director holds
property on trust for the co where the director acquires
property as a consequence a breach of duty. The property
concerned will be returned to the co. Where the director
has misapplied the cos assets or property, the co has a
right to sue for the return of the cos property. He is liable
to replace them. Normally the order for the return of
specific assets will be made if the assets are still under the
directors control.
Third parties who are involved in a directors breach of duty
may also be sued as constructive trustees. They are
considered to hold the cos assets as constructive trustees,
either because they received the cos property knowing of
the breach of duty, or have knowingly assisted the director
in some dishonest or fraudulent breach of his duty.
Law of Assoc II/ Z.Elias
3.
4.
Rescission of Contract
A contract entered into by a director in breach of his duty can
be rescinded at the cos option. Normally this would be done
where the contract is to the cos detriment. The co may declare
the power exercised by the director in breach of duty as null
and void. This will mean that the transaction entered into by
the director will have no effect. Any money paid will be
returned.
A cos right to rescind may be lost under certain circumstances.
Rescission is not allowed:
where it is no longer possible to restore the parties to their
original position;
where third parties have in good faith acquired rights in the
subject matter of the contract, and
if the company fails to rescind within a reasonable time.
Law of Assoc II/ Z.Elias