Liabilities of a director

Understanding the meaning of director of a company The Companies Act, defines a director in section 2 34 as a director appointed to the board of a company. A company is a juristic person and therefore needs an agent to act on its behalf. A director of the company plays the role of an agent and acts a trustee for the assets of the company. Bad Corporate governance by companies in cases such as Satyam or Kingfisher, highlighted the need for more stringent provisions to ensure the good management of a company.

Liabilities of a director

Officer and Director Liability Officer and Director Liability Decisions made by officers and directors of corporations typically have not subjected these individuals to personal liability. Even if an officer or director makes what turns out to be a bad business decision, the law does not render the person liable unless that decision violates a specific duty imposed on the officer or director.

On the other hand, the law governing corporations has expanded liability in many instances.

Liabilities of a director

This is especially applicable when a director or officer makes a decision that causes financial harm to a corporation, acts in their own interests in making decisions to the detriment of the corporation, or commits a wrongful act or crime. High-profile cases involving wrongdoing by corporate executives in the early s intensified the exposure on how decisions made by those executives can impact a large number of people.

For example, Enron Corporation, an energy company based in Houston, Texas, suffered a major collapse in that led to the largest bankruptcy in U. Acts of fraud on the part of corporate officers and others caused many of the problems. Both officers and directors of those corporations faced civil and criminal liability.

Members of boards of directors for Enron and WorldCom agreed to pay millions of dollars out of their own pockets as part of settlement agreements. Securities and Exchange Commission brought charges against top company officers, seeking to recover large fines in addition to criminal convictions.

These incidents also led to major changes in federal securities laws regarding the potential liability for officers and directors. Inside Officer and Director Liability.Officer and Director Liability Decisions made by officers and directors of corporations typically have not subjected these individuals to personal liability.

Even if an officer or director makes what turns out to be a bad business decision, the law does not render the person liable unless that decision violates a specific duty imposed on the officer or director.

10 Personal Liability Pitfalls For Directors And Officers - Law

Fear of personal liability stops many people from joining boards of directors at all -- although the number who have actually been sued is quite small. The news is . Moreover, the potential liabilities of a non-executive director are just as onerous as those of executive directors, although the non-executive director is unlikely to have the same ability to influence, manage or direct the company’s activities and performance as his executive colleagues.

This is the third of four articles summarising the general duties and potential liabilities of a director of an English private company (which is not in a group with a PLC). Definition of liabilities of directors: Directors are usually not personally liable for ultra vires acts (or for the intra vires acts that exceed the powers vested in them), but may be sued by the stockholders (shareholders) for breach of.

This is the third of four articles summarising the general duties and potential liabilities of a director of an English private company (which is not in a group with a PLC). Day-to-day management of a company is delegated to the directors by its shareholders.

What are the duties and liabilities of a director of a company?