Directors

Who is a Director…? Companies are legal persons. However, they are legal fictions. Therefore, they neither have a body nor a soul. Eg - Ferguson V. Wilson Who is responsible for acting on behalf of the company..? Board of Directors Shareholders at general meetings As directors are there to manage the company and to represent the company, the importance of knowing their powers, duties and responsibilities have occurred. The Companies Act plays a vital role in codifying such laws and regulations applicable to directors.

Definition of the Director Based on the Substantive Functions Performed by different individuals, the Companies Act brings a wide group of people within the definition of Director. Accordingly, a “Director” includes; A person occupying the position of director of the company Shadow Directors – Whose directions or instructions a director or the board of the company would be required to act. [Sec 187] Any person to whom a power or the duty of the board has been directly delegated. However, any person acting purely in the Professional Capacity does Not fall within the meaning of a Director.

Delegation of Powers Mainly You have two types of Directors; Executive Directors Non-executive Directors All Directors gain power from the Act and/or the Articles of a company. Practically, executive and non-executive directors meet Periodically. Therefore, to undertake day-to-day company matters, they delegate their powers to others. Such delegations take place either to; Committees of Directors A Director Employees Third parties Exemption – Any person who advices the company on substantial part of the company’s functions will fall within the category of “Director”. Eg - Secretary of State for Trade and Industry V. Deverell

The Act specifically recognizes the ability for a director to delegate his powers unless prohibited by the Articles or special situations as mentioned in the Act (Sixth Schedule). Important – The board will still be responsible for exercise of such power if it has reasons to believe that; The delegate is not exercising the power in conformity with the duties of directors as imposed by Law. If the board fails to monitor the power used by delegates Eg – Section 186(2) Secretary of State for Trade and Industry V. Deverell The delegation of power is subject to the implied condition that it should be exercised honestly and on behalf of the company.