Duties of Directors and Officers in Companies

The duties of the directors and officers in companies, are governed by the provisions of the company law, the articles and memorandum of association of the company and, moreover, the corporate governance rules. Herein, we mention that, the directors of the company and the officers are to be taken as agents of the company. 

However, always, the directors share with the officers the same fiduciary duties that an agent owes the principal. The recent trend, in the corporate transactions, has been to raise the standard of conduct required of directors and officers.

There are fiduciary duties that the officers and the directors owe to their company including, the duty to act within one’s authority and within the powers of the company as mentioned in its activities. And, there is also the duty to act diligently and with due care in conducting the affairs of the company. Moreover, the duty is also act with loyalty and good faith for the benefit of the company.

Directors and officers must act within the authority given to them by the company, by the law, the articles, and the related bylaws. The directors and or the officers may be liable to the company if it is damaged by an act exceeding their authority or if they act outside of the scope of the corporation’s authority.

However, if they enter an “ultra vires” transaction, justifiably believing it to be within the scope of the company’s business, they are not held liable. Like any principal, a company may ratify an unauthorised act by its directors and officers or other agents.

 This may be done through a resolution of the board of directors or of the shareholders. It may also be implied from acceptance of benefits from the unauthorised act. Ratification, when it occurs, releases the directors or the officers from any liability to the company and binds the company as if the act originally had been authorised.

The company, as a legal juristic person, can’t take actions by itself nor is it able to do such work. Simply, it is impossible. Therefore, this role is vested, by law, on the directors and officers of the company who step into the shoes of the company and take its role on its behalf.

However, the law provides that, the directors and the officers shall perform their duties within the required parameters of the law, in addition, to the customary regular practices in the same field. Attention, professionalism and wisdom are all required from the directors and the officers in the company.

Needless to say, that in case of any negligence or malpractice or fraudulent acts by any one, it will straight open the way for criminal and or civil litigation against the concerned. 

No doubt, all directors or officers in all companies, should excel in performing their duties to achieve best results for themselves, their companies and the whole society. This is what we are all looking for and anticipating from such honest and high calibre personnel.

Dr AbdelGadir Warsama Ghalib is a corporate legal counsel. Email: awarsama@warsamalc.com