Director Duties

Director’s statutory duties
As we know directors have various duties, some of these duties emanate from statutes and others from case law. The duties imposed on directors by virtue of the Companies Act, the basic aim of which is to prevent abuse on the part of the directors who manage the company. Breach of these duties may involve civil or criminal or both civil and criminal liabilities, depending on the section in question. Some of these duties are as follows.
  1. Section 156
Under this section, director has a duty to disclose interests in contracts, property or offices.
Under section 156(1), when a company enters into a transaction or is proposing to enter into a transaction and a director has directly or indirectly an interest in that transaction, he must declare the nature of his interest at the meeting of directors as soon as the relevant facts have come to his knowledge.
Under section 156(2) states that interest shall be taken to mean material interest.
Section 156(10) provides that the breach of section 156 results in the commission of an offence.
  2. Section 157
Under section 157(1), director has a duty to act honestly and use reasonable diligence in the discharge of his duties. The term ‘act honestly’ covers a multitude of matters, such as must act in the best interests of the company. The term ‘reasonable diligence’ is apt to cover due care, skill and diligence.
Under section 157(2), director has a duty not to make improper use of information acquired through position to gain an advantage for himself or any other person, or to cause detriment to the company.
Section 157(3) states If section 157 is breached the director would have to return profits made by him, or be liable for losses suffered by the company, and that he would be guilty of an offence.
  3. Section 162
Under section 165, director has a duty to disclose interest in shares, debentures.
Section 162(1) provides that a company, other than an exempt private company, shall...