Duty & Liability of Officers

1. Duty & Liability of Officers S. 132

2. S. 132 (1) A director of a company shall at all times exercise his powers for a proper purpose and in good faith in the best interest of the company. • Reformulation of the previous “ honest and use reasonable diligence” ~ honest require some element of wrongdoing or fraud. • Reformulation lends clarity to the obligation of a director that he must act to the best interest of the company, not the shareholders or other principal. • Marchesi v Barnes & Keogh [1970]: “to act honestly refers to to acting bona fide in the interest of the company the performance of functions attaching to the office of the director.” • The test by courts: whether the directors have done what directors honestly believe to be right & they normally accept that they have, unless the court is satisfied that they have not behaved as honest mes of business might be expected to act.

3. Best interests of the company • Brady & Brady v Brady & Anor (1988): “the expression ‘interest of the company’ is one which is often used but rarely defined…possible that it has slight different meaning in different context.” per Nourse LJ. • Narrow def: “interests of the company’s employees in general as well as interest of members (as in the UK Companies Act 1985; Singapore companies Act) • May at times mean “interests of creditors” especially when the company is insolvent or approaching insolvency. • Directors may take into account the interests of both present & future shareholders (obiter: Dawson v Intnl Coats Paton)

4. Act for a Proper Purpose • A fiduciary duty. • Howard Smith v Ampol Petroleum Ltd: directors who had acted in good faith are still liable for exercising their powers for collateral purpose. • Duty to act for proper purpose is independent on the duty of good faith. • Should not act for a purpose different from that which the powers were conferred upon them.

5. s. 132 (1A):Exercise Reasonable Care, Skill & Diligence (a) the knowledge, skill and experience which may reasonably be expected of a director having the same responsibilities; and (b) any additional knowledge, skill and experience which the director in fact has. • Courts are reluctant to interfere with directors’ business judgment & taken lenient view of duties of care, skill & diligence; unwilling to challenge dir’s foresight / condemn directors.

6. Re City Equitable Fire Insurance Co Ltd. • Skill ; care ; & reasonable diligence are different. • Duty of skill:exhibit the degree of skill reasonably expected from a person with his knowledge & experience. No minimum qualification of director in the Act. If director possess certain skills, he is expected to use it for the coompany and cannot defend otherwise.

7. Duty of care: objective standard of care. Directors must be careful. • Daniels v Anderson: tortious duty of care • Marquis of Bute’s • Duty of diligence: Re City Equitable Fire Insurance Co should be reconsidered: proposed that a director is not bound to give continuous attention to the affairs of the company. • Executive & non-executive directors

8. Business Judgment • S. 132(6) definition: means any decision on whether or not to take action in respect of a matter relevant to the business of the company. • If he meet the requirements under s. 132(1A) & equivalent under common law & in equity as in s. 132(1B): (a) makes the business judgment in good faith for a proper purpose; (b) does not have a material personal interest in the subject matter of the business judgment; (c) is informed about the subject matter of the business judgment to the extent the director reasonably believes to be appropriate under the circumstances; and (d) reasonably believes that the business judgment is in the best interest of the company.