Business PME is a gate of free information bound for the companies in the United States of America. This website offers thousands of contents as well as a companies directory.
The group’s other BtoB websites
-- Professional Networking
Friday March 19th 2010
Searcharticles Search
companies
- Strategy
- Marketing
- Advertising
- Trade
- Human Ress.
- Law & Rights
- Economics
- Finance
- Production
- Technologies
Board of decisions : duties | ||
Because directors exercise control and management over the company, but companies are run (in theory at least) for the benefit of the shareholders, the law imposes strict duties on directors in relation to the exercise of their duties. The duties imposed upon directors are fiduciary duties, similar in nature to those that the law imposes on those in similar positions of trust: agents and trustees. In relation to director's duties generally, two points should be noted: the duties of the directors are several (as opposed to the exercise by the directors of their powers, which must be done jointly); and the duties are owed to the company itself, and not to any other entity. This doesn't mean that directors can never stand in a fiduciary relationship to the shareholders; they may well have such a duty in certain circumstances. "Acting in good faith"Directors must act honestly and in good faith. The test is a subjective one - the directors must act "bona fide in what they consider - not what the court may consider - is in the interests of the company... ". However, the directors may still be held to have failed in this duty where they fail to direct their minds to the question of whether in fact a transaction was in the best interests of the company. Difficult questions can arise when treating the company too much in the abstract. For example, it may be for the benefit of a corporate group as a whole for a company to guarantee the debts of a "sister" company, even though there is no ostensible "benefit" to the company giving the guarantee. Similarly, conceptually at least, there is no benefit to a company in returning profits to shareholders by way of dividend. However, the more pragmatic approach illustrated in the Australian case of Mills v Mills (1938) 60 CLR 150 normally prevails: "[directors are] not required by the law to live in an unreal region of detached altruism and to act in the vague mood of ideal abstraction from obvious facts which must be present to the mind of any honest and intelligent man when he exercises his powers as a director." "Proper purpose"Directors must exercise their powers for a proper purpose. Whilst in many instances an improper purpose is readily evident, such as a director looking to feather his or her own nest or divert an investment opportunity to a relative, such breaches usually involve a breach of the director's duty to act in good faith. Greater difficulties arise where the director, whilst acting in good faith, is serving a purpose that is not regarded by the law as proper. The seminal authority in relation to what amounts to a proper purpose is the Privy Council decision of Howard Smith Ltd v Ampol Ltd [1974] AC 832. The case concerned the power of the directors to issue new shares. It was alleged that the directors had issued a large number of new shares purely to deprive a particular shareholder of his voting majority. An argument that the power to issue shares could only be properly exercised to raise new capital was rejected as too narrow, and it was held that it would be a proper exercise of the director's powers to issue shares to a larger company to ensure the financial stability of the company, or as part of an agreement to exploit mineral rights owned by the company. If so, the mere fact that an incidental result (even if it was a desired consequence) was that a shareholder lost his majority, or a takeover bid was defeated, this would not itself make the share issue improper. But if the sole purpose was to destroy a voting majority, or block a takeover bid, that would be an improper purpose. Not all jurisdictions recognised the "proper purpose" duty as separate from the "good faith" duty however. Copyright 2008 - France BtoB from Wikipédia
|
• Age Discrimination in Employment Act (US&hellip
• Corporate benefit • Derivative suit • Corporation sole • Bankruptcy • Employment discrimination • The labour movement | |
