Tag: Director

Directors of a Company – Appointment and Legal Relationship

Directors of a company are individuals that are elected as, or elected to act as, representatives of the stockholders to establish corporate management related policies and to make decisions on major company issues. They act on the basis of resolutions made at directors’ meetings, and derive their powers from the corporate legislation and from the company’s AOA.

The success of the company depends, to a very large extent, upon the competence and integrity of its directors. As the company’s agents, they can bind the company with valid contracts entered into with third-parties such as buyers, lenders, and suppliers. They are the trustees for the firm and whether appointed validly or not, they are individually and collectively liable for the acts and/or negligence of the firm. Unlike stockholders, directors cannot vote by proxy and, unlike employees, they cannot absolve themselves of their responsibility for the delegated duties. It is, therefore, necessary that management of companies should be in proper hands. The appointment of directors is accordingly strictly regulated by the act. There are now special provisions for preventing management by undesirable persons.