Directors - Definition - Law Dictionary Home Dictionary Definition directors

Definition :

Directors, persons appointed or elected according to law, authorized to manage and direct the affairs of a corporation or company. The whole of the directors collectively form the board of directors. Their powers, if the company be incorporated by Act of Parliament, are derived from its special Acts and ss. 90-100 of the (English) Companies Clauses Act, 1845; if the company be incorporated under the (English) Companies Act, 1929, see ss. 139 et seq., ibid. The company is bound by all acts of the directors within the scope of their authority. They may receive a salary, but may make no personal profit from the company [see, however, Re Dover Coalfield Ltd., (1908) 1 Ch 65], nor can a pension be granted to a retiring managing director, Normandy v. Ind, Coope & Co., (1908) 1 Ch 84; but they were under no personal liability except for fraud, as to the criminal liability for which see Larceny Act, 1861 (24 & 25 Vict. c. 96), ss. 81 et seq., and DECEIT. Public companies registered after October 31st, 1929, must have at least two directors. A private company, however, need not have any directors, and one company can be the sole director of another company [Re Bulawayo Market Co., (1907) 2 Ch 458]. Directors are not trustees, but paid confidential agents, with very extensive powers, selected to manage the affairs of the company; they are, however, trustees of any property of the company that may have come into their hands, however honestly they may have acted, and can as such plead the limitation under the Trustee Act, 1888, s. 8 [Re Lands Allotment Co., (1894) 1 Ch 616]. As to their position generally, see Re Faure Electric Accumulator Co., (1889) 40 Ch D 141.

The (repealed) (English) Directors Liability Act, 1890 (53 & 54 Vict. c. 64), now reproduced in an amended form by the (English) Companies Act, 1929, s. 37 (see DECEIT), was passed in consequence of the decision of the House of Lords in Peek v. Derry (1889) 14 App Cas 337, that directors making an untrue statement in a prospectus which they honestly, though without reasonable ground, believed to be true, were not liable to a shareholder taking shares on the faith of such prospectus, reversed the law as to laid down. There are, however, qualifications to meet the case of withdrawal of consent to become a director before the issue of the prospectus and that it was issued without his authority, knowledge, or consent, or otherwise by public notice that it was issued without his knowledge or consent and of the grounds for any withdrawal of consent, see s. 37(1)(iii), and to meet the case of statements made on the authority of 'experts,' or official documents, see s. 37(1)(iv.). By sub-s. (3) any director becoming liable to pay damages under the Act is entitled to contribution from his co-directors, unless the co-directors were innocent, and he was guilty of fraudulent misrepresentation, thus forming an exception to the old rule of Merryweather v. Nixan, (1799) 8 TR 196, that there was no right of contribution amongst tortfeasors (see now LAW REFORM). S. 372 of the Act of 1929 allows the Court in certain cases to relieve a director from liability for negligence or breach of trust. A director will not generally be personally liable on a promissory note or cheque which he has signed on behalf of the company, Chapman v. Smethurst, (1909) 1 KB 927.

The (English) Companies Act, 1929, disqualifies (ss. 140 and 141) a person from being appointed director of a company or from being named in a prospectus or advertised as a director or proposed director unless he has signed and filed with the registrar a consent in writing to act and to take his qualification shares, if any, and other formalities, and obliges him to obtain the qualification shares, if any, within two months with penalties for contravention; for other offences see s. 60 (concealment of name of creditor, or nature or amount of any debt); s. 275 (carrying on the company's business to defraud creditors or for any fradulent purpose); s. 93 (not publishing the company's name or not using the companies as provided by the s.); s. 41 (irregular allotment under ss. 39 and 40).