1. 1 Directors of a company

2. 2 Definitions Section 2 – Section 2 – "director" ( 董事 ) includes any person occupying the position of director by whatever name called; "director" ( 董事 ) includes any person occupying the position of director by whatever name called; "officer" ( 高級人員 ), in relation to a body corporate, includes a director, manager or secretary; "officer" ( 高級人員 ), in relation to a body corporate, includes a director, manager or secretary;

3. 3 "shadow director" ( 影子董事 ), in relation to a company, means a person in accordance with whose directions or instructions the directors or a majority of the directors of the company are accustomed to act; "shadow director" ( 影子董事 ), in relation to a company, means a person in accordance with whose directions or instructions the directors or a majority of the directors of the company are accustomed to act;

4. 4 Any provision of this Ordinance that refers (in whatever words) to- (a) the directors of a company; (b) the board of directors of a company; (c) a majority of the directors of a company; or (d) a specified number or percentage of the directors of a company, shall, unless the context otherwise requires, apply with necessary modifications in relation to a private company that has only one director.

5. 5 Minimum Number of directors Section 153 and 153A – Section 153 and 153A – Public companies – TWO Private companies – ONE

6. 6 Powers of Directors General power of managing a company as vested in the directors by AA General power of managing a company as vested in the directors by AA Exercise of power – Exercise of power – Collectively at meetings; or Collectively at meetings; or Individual director in accordance with delegation. Individual director in accordance with delegation. Subject resolutions, may decide informally if unanimous Subject resolutions, may decide informally if unanimous Art. 108 of Table A: allows decision by circulation of papers Art. 108 of Table A: allows decision by circulation of papers Not subject to resolutions passed by shareholders Not subject to resolutions passed by shareholders

7. 7 Managing Director Article 109 – directors may appoint managing director Article 109 – directors may appoint managing director Powers and duties – Powers and duties – Depend on contract of service with the company Depend on contract of service with the company Although no power to initiate proceedings on behalf of company, such decision may be ratified by the board Although no power to initiate proceedings on behalf of company, such decision may be ratified by the board

8. 8 Duties of Directors As agents of the company – fiduciary duties as applicable to an agent, based on requirement to show the utmost good faith to the company

9. 9 Generally, the duty is to the company, NOT the shareholders: Generally, the duty is to the company, NOT the shareholders: Percival v Wright (1902) Percival v Wright (1902) Exceptions – Exceptions – where directors have undertaken to act as agent of shareholders: where directors have undertaken to act as agent of shareholders: Allen v Hyatt (1914) Allen v Hyatt (1914) Dawson International plc v Coats Paton plc Dawson International plc v Coats Paton plc

10. 10 Directors are in a position of trust as regards the sharesholders Directors are in a position of trust as regards the sharesholders Coleman v Myers (1977) Coleman v Myers (1977)

11. 11 Fiduciary duties owed to the company To act bona fide for the benefit of the company To act bona fide for the benefit of the company To Exercise powers for their proper purpose To Exercise powers for their proper purpose Not to allow any conflict between directors ’ duties and directors ’ personal interests Not to allow any conflict between directors ’ duties and directors ’ personal interests

12. 12 To act bona fide for the benefit of the company A director has to act honestly and in good faith A director has to act honestly and in good faith Re Smith and Fawcett Ltd (1942) – to act in the interest of the company as a whole, not in the interest of the directors or only a section of the shareholders Re Smith and Fawcett Ltd (1942) – to act in the interest of the company as a whole, not in the interest of the directors or only a section of the shareholders

13. 13 Exercise powers for their proper purpose Exercise powers for their proper purpose Anything not done for proper purpose is beyond director ’ s authority Anything not done for proper purpose is beyond director ’ s authority Piercy v S Mills and Co Ltd Piercy v S Mills and Co Ltd Hogg v Cramphorn Ltd Hogg v Cramphorn Ltd Howard Smith v Ampol Petroleum Ltd Howard Smith v Ampol Petroleum Ltd Bishopgate Investment Management Ltd (in liq) v Maxwell (No2) Bishopgate Investment Management Ltd (in liq) v Maxwell (No2)

14. 14 Conflict of duty and interest – Conflict of duty and interest – Director is in fiduciary position in relation to company Director is in fiduciary position in relation to company Contract is voidable by company if director has a personal interest in it which is adverse to the company and profits made by the director may be recovered by the company (unless sanctioned by articles or by shareholders) Contract is voidable by company if director has a personal interest in it which is adverse to the company and profits made by the director may be recovered by the company (unless sanctioned by articles or by shareholders)

15. 15 Directors are liable even without – Directors are liable even without – Fraud Fraud Lack of good faith Lack of good faith Loss to the company Loss to the company Regal (Hastings) Ltd v Gulliver

16. 16 Directors may be able to make an investment on his own account after his company has considered the same proposition and rejected it. Directors may be able to make an investment on his own account after his company has considered the same proposition and rejected it. Peso Silver Mines Ltd v Cropper Peso Silver Mines Ltd v Cropper Queensland Mines Ltd v Hudson Queensland Mines Ltd v Hudson

17. 17 Duty of care and skill owed to the company Re City Equitable Fire Insurance Co Ltd Re City Equitable Fire Insurance Co Ltd not as onerous as the fiduciary duties not as onerous as the fiduciary duties A director need not, in the performance of his duties, exhibit a greater degree of skill than may reasonably be expected from a person of his knowledge and experience. A director need not, in the performance of his duties, exhibit a greater degree of skill than may reasonably be expected from a person of his knowledge and experience. A director is not bound to give continuous attention to the affairs of the company, unless he is employed full-time. A director is not bound to give continuous attention to the affairs of the company, unless he is employed full-time.

18. 18 Subject to organization of the company, a director may be justified in trusting that officials do perform their duties honestly. Subject to organization of the company, a director may be justified in trusting that officials do perform their duties honestly. Dorchester Finance Co Ltd v Stebbing and Re Boldwin Construction Co Ltd Dorchester Finance Co Ltd v Stebbing and Re Boldwin Construction Co Ltd The duties of a director whether executive or not are the same. The duties of a director whether executive or not are the same.

19. 19 Ratification of a breach of duty Majority of members in general meeting may, after full disclosure, waive a breach of duty by a director Majority of members in general meeting may, after full disclosure, waive a breach of duty by a director Ratification could not be effective if the relevant contract was ultra vires the company Ratification could not be effective if the relevant contract was ultra vires the company

20. 20 The effect of a breach of duty Action may be brought for one or more of the following remedies – Action may be brought for one or more of the following remedies – Injunction Injunction Rescission Rescission Damages Damages Account of Profits Account of Profits Note position of third parties a constructive trustees Note position of third parties a constructive trustees

21. 21 Power of the court to grant relief for breach Section 358 – Court may relieve director of liabilities Section 358 – Court may relieve director of liabilities if he has acted honestly if he has acted honestly if he has acted reasonably, and if he has acted reasonably, and he ought fairly to be excused he ought fairly to be excused