Directors of a
company
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Definitions

Section 2 –

"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;
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
"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;
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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.
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Minimum Number of directors

Section 153 and 153A –
Public companies – TWO
Private companies – ONE
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Powers of Directors


General power of managing a company as
vested in the directors by AA
Exercise of power –
Collectively at meetings; or
 Individual director in accordance with delegation.
 Subject resolutions, may decide informally if unanimous
 Art. 108 of Table A: allows decision by circulation of
papers
 Not subject to resolutions passed by shareholders

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Managing Director


Article 109 – directors may appoint managing
director
Powers and duties –
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

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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
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
Generally, the duty is to the company, NOT the
shareholders:


Percival v Wright (1902)
Exceptions –

where directors have undertaken to act as agent of
shareholders:


Allen v Hyatt (1914)
Dawson International plc v Coats Paton plc
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
Directors are in a position of trust as regards the
sharesholders

Coleman v Myers (1977)
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Fiduciary duties owed to the
company

To act bona fide for the benefit of the company

To Exercise powers for their proper purpose

Not to allow any conflict between directors’
duties and directors’ personal interests
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To act bona fide for the benefit of
the company

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
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

Exercise powers for their proper purpose
Anything not done for proper purpose is
beyond director’s authority
Piercy v S Mills and Co Ltd
 Hogg v Cramphorn Ltd
 Howard Smith v Ampol Petroleum Ltd
 Bishopgate Investment Management Ltd (in liq) v
Maxwell (No2)

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
Conflict of duty and interest –
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)

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
Directors are liable even without –
Fraud
 Lack of good faith
 Loss to the company

Regal (Hastings) Ltd v Gulliver
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
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
 Queensland Mines Ltd v Hudson

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Duty of care and skill owed to the
company

Re City Equitable Fire Insurance Co Ltd
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 is not bound to give continuous attention
to the affairs of the company, unless he is employed
full-time.

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

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

The duties of a director whether executive or not are
the same.
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Ratification of a breach of duty


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
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The effect of a breach of duty

Action may be brought for one or more of the
following remedies –
Injunction
 Rescission
 Damages
 Account of Profits


Note position of third parties a constructive trustees
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Power of the court to grant relief for
breach

Section 358 – Court may relieve director of
liabilities
if he has acted honestly
 if he has acted reasonably, and
 he ought fairly to be excused

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