Commercial Law 1B - Lecture 6: Directors Part 1

Flashcards covering key definitions, types of directors, duties, and statutory liabilities from Commercial Law 1B, Lecture 6.

Board of Directors (BOD)

Directors acting collectively in the course of their duty on behalf of the company, holding authority to manage and exercise all powers and functions of the company unless restricted by the Act or MOI.

Director

A member of the Board of Directors occupying the position of a director or alternate director by whatever name designated, including a de facto director.

Executive Director

A director involved in the day-to-day management and running of the company who is often a full-time salaried employee.

Non-Executive Director (NED)

A member of the board of directors without executive responsibilities who is not salaried or involved in day-to-day management, but offers impartial expertise and knowledge to the board.

Independent Director

A director who has no interest, position, association, or relationship that, when judged from the perspective of a reasonable informed third party, is likely to influence unduly or cause bias in decision-making.

Ex Officio Director

A person who is a director of a company as a consequence of holding some other office, title, or designation (such as CEO or HOD), and is not appointed by shareholders.

MOI Appointed Director

A director whose manner of appointment and appointee are specified by the MOI, such as granting certain creditors the right to appoint directors.

De Facto Director

A person who has not officially or validly been appointed as a director (or has a defect in appointment) but openly claims, purports to act, and acts as a director.

Alternate Director

A person appointed to serve on occasion as a member of the Board of Directors in substitution for a particular appointed director, provided the company's MOI permits it.

Elected Director

A director elected by shareholders or those entitled to exercise voting rights; in a profit company, at least $50\%$ of directors must be elected by shareholders.

Temporary Director

A person appointed by the board of directors to fill a vacancy and serve on a temporary basis until an elected director fills the vacancy.

Manager

An employee of a company who executes instructions and implements decisions made by directors, and who is appointed and dismissed by directors rather than shareholders.

Fiduciary Duty

A director's prime duty as an agent of the company to act in good faith, for a proper purpose, and in the best interests of the company.

Duty of Reasonable Care

The statutory and common law duty requiring a director to exercise the degree of care, skill, and diligence reasonably expected of a person carrying out the same functions with the same general knowledge, skill, and experience.

Business Judgement Test (Section $76(4)$)

A statutory defence that protects directors from personal liability for business decisions if they took reasonably diligent steps to become informed, had no material personal financial interest (or disclosed it), and had a rational basis for believing the decision was in the best interests of the company.

Section $218$ of the Companies Act

A general civil remedy providing that any person who contravenes the Companies Act is liable to any other person for loss or damage suffered as a result of that contravention.

Director Indemnification Voidness

The legal rule establishing that any provision in an agreement, MOI, rules, or resolution attempting to indemnify or exempt a director from liability for breach of fiduciary duty is void.