Liabilities of directors

Civil Code

Whilst there is no specific liability under the Civil Code attaching to directors, the directors and/or the chair of the board will be personally liable in the event of misconduct separable from their capacity as members of the board.

General law conditions will therefore apply for the exercise of any action for tort liability by third parties against directors (i.e. existence of a misconduct, a loss, and a causal link between this misconduct and the alleged loss).

In order for a third party to trigger the personal liability of a director or the chair of the board (as opposed to the company’s tort liability, as a legal entity) the following conditions should be fulfilled:

• Characterisation of a fault separable from the person's functions and which is attributable to the director or the chair of the board personally.
• Characterisation of a particularly serious fault committed by the director or the chair of the board intentionally and incompatible with the normal exercise of their functions.

Commercial Code

Various liabilities may arise under the Commercial Code and notably the following:

• Law infringement/breach of articles of association/mismanagement. The directors are liable individually or jointly and severally, as the case may be, to the company or to third parties, either for infringements of the laws or regulations applicable to joint stock companies, or for breaches of the articles of association, or for faults committed in their management. Where several directors have cooperated in the same acts, the court shall determine the contributory share of each in the indemnification of the loss.
• Allocation of fictitious dividends/concealment of the true situation of the company. A term of imprisonment of up to five years and/or a fine of up to DZD200,000 (approx. USD1,500) shall be imposed if directors and/or the chair of the board, deliberately distribute fictitious dividends among the shareholders or deliberately present to the shareholders an inaccurate balance sheet in order to conceal the true situation of the company.
• Obstructing a shareholder's participation in a meeting. Any person who knowingly prevents a shareholder from participating in a shareholders' meeting shall be punished by imprisonment for a term of three months to two years and/or a fine of up to DZD200,000 (approx. USD1,500).
• Offences relating to the ordinary annual general meeting. The chair of the board or directors who have not convened the ordinary general meeting within six months of the end of the financial year or, in the case of an extension, within the period fixed by a court decision or who have not submitted the relevant documents for the approval of this meeting, shall be punished by imprisonment for a term of two months to six months and/or a fine of up to DZD200,000 (approx. USD1,500).
• Offences relating to shareholder meetings. Directors and/or the chair of the board shall be punished by a fine if they fail to send notice of all eligible shareholders, fail to provide proxy forms or other information relating to the holding of the meeting, fail to provide the necessary documents to shareholders, fail to provide necessary documents to shareholders within the prescribed time limits prior to the meeting or fail to comply with the procedures for holding meetings.
• Providing false information in reports. The chair of the board or any director who knowingly gives or confirms inaccurate information in the reports presented to the general meeting called to decide on the cancellation of the shareholders' preferential subscription right shall be punished up to two years imprisonment and/or a fine of up to DZD500,000 (approx. USD3,700).

Directors ordinarily owe their duties to the company itself and not directly to the parent or other group companies, individual shareholders or creditors.  Therefore, ordinarily only the company can bring an action for breach of duty against a director.

However, shareholders and certain other persons are able to bring an action for breach of duty on behalf of the company in certain circumstances (a statutory derivative action).  Broadly, a shareholder must first obtain the court's permission to proceed with a statutory derivative action and the court will take into account a number of factors when deciding whether to grant this permission.  This includes whether it is probable that the company itself will not bring the proceedings or properly take responsibility for them, whether the applicant is acting in good faith and whether it is in the best interests of the company that leave is granted (among other factors).

A company may seek a range of remedies against a director for breach of duty including damages or compensation, grant of an injunction, an order that property held by the director be held on trust for the company, entitlement for profits made by the director in breach of duty, and rescission of a contract entered into by a director improperly.

ASIC may also bring proceedings against a director alleging breach of certain statutory duties.  Under the Act, a director who is found to have breached their duties can be guilty of a criminal offence (resulting in fines or imprisonment), be ordered to pay a pecuniary penalty, be ordered to compensate the company or others for any loss or damage they have sustained due to the director's conduct, and be prohibited from managing companies for a specified period.

Directors owe their duties to the company itself and not directly to shareholders or creditors. Therefore, only the company can bring an action for breach of duty against a director.

Directors who violate their duties shall be jointly and severally liable to the company for the resulting damage. In particular, they shall be liable for compensation if:

• Company assets are distributed in breach of the provisions of the Act or of the articles of association, in particular if capital contributions or additional contributions are returned in whole or in part to shareholders, interest or shares in profits are paid out, or own shares in the company are acquired, pledged or withdrawn.
• Payments are made after the time at which they were obliged to request the opening of the insolvency proceedings.

Shareholders are able to bring an action for breach of duty on behalf of the company in certain circumstances.

A company may seek a range of remedies against a director for breach of duty including damages, recovery of misapplied property (including the payment of unlawful dividends), accounting for profit made in breach of duty, an injunction to prevent breach and rescission of a contract.

Depending on the nature and manner of the directors’ employment, they may be removed from office by resolution on written notice. The company may also sue for breach of contract or breach of duty (depending on the manner in which the director was appointed).

As a general principle, directors are not personally liable for actions taken by them during the performance of their mandate. Actions taken will be imputed to the company. In certain cases however, a director can be held responsible for acts taken during the performance of their mandate both towards the company and towards third parties.

Generally speaking, directors may be held liable, towards the company and/or third parties, for: management faults (if their acts go beyond the margin of appreciation in which normal, prudent and careful directors, in the same circumstances, could reasonably have deviating views);  breach of law or breach of the articles of association; and under the general extra-contractual regime or for infringements of criminal law or special laws.

As a general rule, fault, damage and a causal link between fault and damage must be established if the legal proceedings are to be successful.

If the legal person has several directors, a distinction is made whether the managing organ constitutes a collegiate body or not:

• If the management organ acts as a collegiate body, the members are jointly and severally liable for the faults committed by the collegiate body.
• If the management organ does not act as a collegiate body, then each director is only liable insofar as they can be blamed for fault. However, if the error consists in the violation of a provision of company law or the articles of association, the members of the management organ are jointly and severally liable for all damage resulting from this fault.

However, a director shall be relieved of liability if they did not take part in the fault committed and they have reported the alleged fault to all the other members of the management organ. This denunciation and the discussions to which it gives rise shall be recorded in the minutes.

The liability regime affects not only the members of the management organ, but also the persons entrusted with the daily management, as well as the de facto directors, understood as those who have held the power to effectively manage the legal person. Finally, the permanent representative of a legal entity appointed as director - necessarily a natural person - shall be jointly and severally liable with that legal person, as if they had exercised this mandate personally.

The director’s primary duty is to act in the best interest of the company.  Therefore, any act which is deemed not to have been done in the best interest of the company would be conceived as a breach of duty. Generally, only the company can bring an action for breach of duty against a director.

However, shareholders or any other entitled person or director of the company may by way of a court application bring an action for breach of duty on behalf of the company (a derivative action) in certain circumstances.

The application shall:

• Be in the name and on behalf of the company or any subsidiary.
• Intervene in proceedings to which the company or any related company is a party for the purpose of continuing, defending, or discounting the proceedings on behalf of the company or subsidiary, as the case may be.

Remedies for the breach include damages or compensation, restoration of property, accounting for profit made in breach of duty, an interdict to prevent breach and rescission of a contract.

If a director breaches the Corporations Act, its Rules or the company's bylaws causing damage to others, they must compensate the damages caused, in addition to any other civil, administrative or criminal sanction.

Directors will be jointly and severally liable (with other directors and/or the company) for damages caused due to any guilty and fraudulent actions.

Any stipulation of the bylaws and any agreement of the shareholders' meeting that releases or limits the directors' responsibility will be null.

The approval by the shareholders' meeting of the annual report and balance sheet presented by the board of directors or of any other account or general information, does not release the directors from their responsibility for certain acts or businesses; nor does the specific approval of these exempt them from that responsibility, when they have been carried out or executed with slight negligence (culpa leve), gross negligence (culpa grave) or fraud (dolo).

To protect themselves from liability for an act or agreement, directors must oppose that act or agreement and this opposition must be recorded in the minutes of the relevant directors’ meeting and made known to shareholders in the next ordinary shareholders' meeting.

Any shareholder or shareholders, owning more than 5% of the corporation's capital, or any director or directors may claim any damages caused to the company on its behalf.

In addition, the Corporations Act presumes the liability of directors and they will be jointly and severally liable in certain cases.

Finally, the Corporations Act provides that in case of breach of the Corporations Act, its Rules and other provisions, the company's managers and legal representatives will be personally liable unless they didn't concur with the decision or they opposed it.

Any director who has violated the duty of due managerial care must return to the business corporation any benefit obtained in connection with such behaviour. Where such return of the benefit is impossible, the obliged person shall pay an equivalent amount to the business corporation in cash.

Every shareholder is entitled to claim, on behalf of the company, compensation or damage against a director or the fulfilment of their obligations, and is entitled to represent the company in the following proceedings. The same rights apply to the subsequent enforcement of the ruling on the matter.

Members of the board of directors may be held liable to pay damages to the company, the shareholder(s) or a third party if the directors in the performance of their duties intentionally or negligently caused damage to any of them.  

The decision to bring an action against one or more of the directors is determined by the shareholder(s) by simple majority. However, shareholder(s) that hold(s) at least 10% of the total share capital may bring an action against a director on behalf of the company if the shareholder(s) has/have opposed either the resolution to grant protection against liability or the resolution to waive the right to commence legal proceedings.

Directors owe their duties to the company itself and generally not directly to the parent or other group companies or individual shareholders. The shareholders have no right to make direct claims towards directors for damage caused to the company which causes a reduction in the value of their shares. Violation of certain specific rules (for example if a shareholder is not given redemption right as provided in the articles of association) could cause damage directly to shareholders and for that shareholders would have direct claim against directors.

In insolvency proceedings, creditors may through the bankruptcy estate be able to make claims against directors. Individual creditors may have also direct claims against directors for violations of law or articles of association intended to protect creditors.

Shareholders are able to bring an action for breach of duty on behalf of the company (a derivative action) in certain circumstances. Broadly, claiming shareholders must either own at least 10 per cent of all shares of the company or the court should consider that not giving the right to make such a claim would violate equal treatment of the shareholders.

A company may seek a range of remedies against a director for breach of duty including damages, recovery of misapplied property (including the payment of unlawful dividends), an injunction to prevent breach and rescission of a contract.

Directors may incur civil liability if they breach company laws and regulations, the company’s bylaws or their duty of care in management, to the extent that damage is caused directly to the person bringing the action before the court.

A shareholder may sue a director for compensation for any prejudice it has personally suffered because of the action of a director, provided that the prejudice suffered is different from the prejudice suffered by the company. If several shareholders have suffered directly and individually from a prejudice resulting from the same facts or action, they may initiate a collective action and instruct one or more of them to act on their behalf.

Shareholders may sue a director on the company’s behalf in order to obtain a compensation for the prejudice suffered by the company (ut singuli action).

With respect to third parties, directors may only be held liable if their misconduct is contrary to the normal exercise of their corporate functions and is personally attributable to them (faute séparable des fonctions).

The remedies against a director for breach of duty include: damages, imprisonment and/or fines.

There may be additional sanctions such as prohibition from exercising a public, social, commercial, banking and/or industrial activity, permanently or temporarily.

In general, managing directors owe their duties to the company itself. Therefore, in case if any breaches, only the company is entitled to bring an action for breach of duty against a managing director.

Different from other jurisdictions, under certain circumstances, (minority) shareholders may not bring derivative claims of the company against a managing director.

In general, third contractual parties may not personally sue a managing director for a breach of their duties. This is only possible in cases of the legal institute of “immorality” (Sittenwidrigkeit).

When there is a breach of the director’s duties:

• The director is liable to compensate the company for the loss the company suffers as a result of the breach. The director is personally (or in the case of more than one director, jointly and severally) liable to the company or any other person who has lost money or suffered any damage as a result of the director’s breach of duty.  An action may be brought by the company or such person to recover the amount of money lost or the monetary value of the damages caused to, or suffered by, the company or other person.
• The director must account to the company for a profit made by the director as a result of the breach.
• A contract or any other transaction entered into between the director and the company in breach of the director’s duty may be rescinded by the company.

Civil proceedings to enforce the liabilities of a director may be instituted by the company or by a member the company. If an action is brought by a member of the company, it must be either a derivative action on behalf of the company or a representative action on behalf of a class of persons.  In such an action, the remedies that are available against a director may include injunctions, award of damages, recovery of property, accounting for profits and rescission of contract.

Directors owe their duties to the company itself and not directly to the parent or other group companies, individual shareholders or creditors. Therefore, only the company can bring an action for breach of duty against a director.

However, shareholders are able to bring an action for breach of duty on behalf of the company (a derivative action) in certain circumstances. Broadly, a shareholder must first obtain the court's permission to proceed with a derivative action and the court will take into account a number of factors when deciding whether to grant this permission – including whether there is a serious question to be tried, whether the shareholder is acting in good faith and the issue is prima facie in the interests of the company, the views of independent shareholders and whether the company is likely to ratify or authorise the act or omission giving rise to the claim.

A company may seek a range of remedies against a director for breach of duty including damages, recovery of misapplied property (including the payment of unlawful dividends), accounting for profit made in breach of duty, an injunction to prevent breach and rescission of a contract.

For damages caused by the directors in the performance of their duties:

• Vis-à-vis their own company. As a general rule, the directors have unlimited liability towards their company for damages caused by the breach of their duties; commencement of an action against the directors for breach of their duties falls within the power of the general meeting; however, if the general meeting decides not to pursue such action, shareholders with at least 5% of the votes (or 1% in the case of public companies) have the right to litigate against the director on behalf of the company (derivative suit).
• Vis-à-vis third parties. As a general rule, it is the company who will be liable towards third parties for the actions of their directors (i.e. such third parties can sue the company, not the individual directors); however, if the director causes damages deliberately to third parties, the director will be liable jointly with the company vis-à-vis the third party.

The Company Law provides that each director shall be personally liable for losses suffered by the company if the concerned director is at fault or is negligent in performing their duties, unless the concerned director can prove the following:

• The losses were not caused by their mistakes or negligence.
• They managed the company in good faith and prudently in the interests and in accordance with the purposes and objectives of the company.
• There were no conflicts of interest, either directly or indirectly, in their management acts that resulted in the losses.
• They took action to prevent the losses from occurring and continuing.

Shareholders (on behalf of the company) that represent at least one-tenth of the entire voting shares may file a lawsuit in the district court against the director who (due to their fault or negligence) causes losses to the company.

Additionally, shareholders are also given the right to file a lawsuit against the company if the shareholders suffer losses caused by the company’s actions that are considered unfair and baseless as a result of the decision of the BOD and/or the BOC.

Directors owe their duties to the company itself and not directly to the parent or other group companies, individual shareholders or creditors.  Therefore, only the company can bring an action for breach of duty against a director.

However, shareholders are able to bring an action for breach of duty on behalf of the company (a derivative action) in certain circumstances.  Broadly, a shareholder must first obtain the court's permission to proceed with a derivative action and the court will take into account a number of factors when deciding whether to grant this permission – including whether the shareholder is acting in good faith, the views of independent shareholders and whether the company is likely to ratify or authorise the act or omission giving rise to the claim.

A company may seek a range of remedies against a director for breach of duty including damages, recovery of misapplied property (including the payment of unlawful dividends), accounting for profit made in breach of duty, an injunction to prevent breach and rescission of a contract.

Directors owe their duties to the company itself. Therefore, the company or the partners can bring a claim for the directors’ damage. A director may incur civil and criminal liabilities for breach of duty.

Civil liability

Without prejudice to the company's potential liability, any manager shall be individually liable to third parties for misconduct in the performance of their duties.

One or several shareholders may file an action in the interest of the company after serving a formal notice to the competent bodies, if such bodies fail to respond within a time limit of 30 days. The applicants have the ability to sue for damages for injury suffered by the company. In the event of a successful claim, damages shall be awarded to the company.

Criminal liability

SARL directors are liable, individually or jointly, as the case may be, to the company or to third parties, either for violations of legislative or regulatory provisions applicable to private limited companies, or of provisions of the articles of association, or for faults committed in their management.

Aside from a suit for compensation for damages sustained personally, members representing a quarter of the shareholders and a quarter of the equity interests may, either individually or collectively, initiate a lawsuit against the manager. The plaintiffs are entitled to seek compensation for the entire damage suffered by the company, to which any damages are awarded.

SA directors shall be individually or jointly liable to the company or third parties, either for violating the legislative or regulatory provisions applicable to public limited companies, or for violating the provisions of the articles of association, or for faults committed in their management.

The extent of directors’ duties and responsibilities and the standard of care required for each director depend on the director's office and their specific expertise. In certain circumstances, directors are jointly liable to the company for damages that result from a failure to fulfil their duties or for failing to take the necessary measures to prevent damage to the company (if they are aware about facts that may adversely affect the company).

For limited companies, civil liability may be incurred by directors towards:

• The company or individual shareholdeers (on behalf of the company) for damages caused by a failure of one or more directors to perform the specific duties and obligations under applicable law and the by-laws with regard to the management of the company. If the board of directors has delegated specific functions to certain directors, then only those directors will be liable for the delegated functions. However, the board of directors will also be held liable if a court finds that the board of directors has breached its duty of supervision and control.
• The company’s creditors if directors have breached the specific rules regarding the preservation of the corporate assets.
• Individual shareholders or third parties for damages directly caused by directors' fraudulent or negligent action.

An action for damages can be filed by the company or by the shareholders (as per SpA, only if they own one fifth of the stock capital or another share, in any case not exceeding one third, set forth in the by-laws and if they can show that the damage was caused by actions exclusively attributable to the director.), or by company's creditors. The contractual nature of the liability means that the plaintiff has the burden to prove the breach of the duty of diligence, the damages and the causal nexus.

The action for liability towards the director can be exercised by the company only after a resolution of the shareholders’ meeting. The action of liability may also be brought upon a resolution of the board of statutory auditors, adopted by a two-thirds majority of its members. The action may be brought within five years of the director's termination of office.

The law provides a general duty of supervision over the management, which persists even if competence is delegated to the executive committee or to one or more directors. The breach of this duty entails a joint liability of all the members of the Board of Directors, unless one of them proves that the conduct of the other directors did not allow the supervision to be performed.

Such joint liability is owed to the company only and therefore not to creditors and third parties.

The liability of the director must be also connected with the violation of the general duty of diligence in making management choices, therefore, the good business conduct of the director is sufficient to exclude the default, notwithstanding the result of the choice made.

In relation to criminal liability, as well as the general rules that apply to all, specific rules of criminal corporate law apply to directors. They mainly concern the following:

• accounting documents
• shareholders' contribution
• distribution of profits and reserves
• corporate assets.

Liabilities to the company and shareholder’s derivative lawsuit

Under the Companies Act, if a director breaches its duties, the director shall be liable to the company for damages arising from the breach.

Even if a director has engaged in a transaction with the company which has been approved by the board of directors (or a majority of directors), the director who engages in the transaction with the company, the director who engages in the transaction on behalf of the company and the other directors approving the resolution will still be liable jointly and severally if the company sustains any loss as a result of that transaction. In order to avoid falling under the latter, a director needs to record their opposition in the minutes of the board of directors or it is assumed that the director has approved the resolution.

If the company does not seek to recover loss arising from a transaction with a director, shareholders who have held stock continuously for at least six months (which may be shortened by the articles of incorporation of a non-public company) may request the company bring a claim against the director to recover the loss. If the company does not bring the claim within 60 days of the shareholder request, the shareholders may bring a derivative claim against the director.

Liability to third parties

In addition to the liability owed to the company, if third parties are damaged by a director’s gross negligence or if a director acts in bad faith in the course of performance of their director duties, such director will be liable to third parties.

Even though the third parties are not "directly" damaged by the directors, they can likely make a claim against the directors under the Companies Act. Specifically, if the company breaches a contract by withholding payment, the counter party to that contract may bring an indemnity claim against a director who acted in bad faith or with gross negligence.  

Directors owe their duties to the company in which they are a director and not to the parent or other group companies, individual shareholders or creditors. Therefore, only the company can bring an action for breach of duty against a director.

However, shareholders are able to bring an action for breach of duty on behalf of the company (a derivative action) in certain circumstances. Broadly, a shareholder must first obtain the court's permission to proceed with a derivative action and the court will take into account a number of factors when deciding whether to grant this permission – including whether the shareholder is acting in good faith, the views of shareholders who have no personal interest (directly or indirectly) in the matter and whether the company is likely to ratify or authorise the act or omission giving rise to the claim.

The consequences of breach (or threatened breach) of the duties of directors are civil in nature and are generally aimed at making good the company’s position and interests following the breach. A breach may however lead to criminal consequences as the Companies Act creates specific offences which give rise to penal consequences including fines and imprisonment.

A company may seek a range of remedies against a director for breach of duty including damages, recovery of misappropriated property (including the payment of unlawful dividends), accounting for profit made in breach of duty, an injunction to prevent breach and rescission of a contract.

Managers are liable to the company for the performance of their mandate and for any misconduct in the management of the company’s affairs. It is generally accepted that this ground for liability may only be invoked by the company, or by a creditor if the company fails to act. The claimant must establish the manager’s fault, the loss suffered and a causal link between the manager’s fault and the loss.

It should be noted that in addition to this liability regime, the LSC states that a company’s manager may be held jointly and severally liable to the company and third parties for all losses resulting from a breach of the LSC or the Articles. Again, the plaintiff must establish the manager’s fault, the loss and a causal link between the managers’ fault and the loss.

Lastly, the general principles of tort provided for by articles 1382 and 1383 of the Luxembourg Civil Code are also applicable to a company’s managers. Thus, managers are individually and personally liable to the company and third parties for any breach of the general duty of care or a provision imposing a specific obligation of a non-contractual nature. Either the company or third parties may bring legal proceedings in tort against a manager. An individual shareholder may also bring proceedings if it has incurred a personal prejudice different from that suffered by the company owing to an act or omission by a manager in this case the shareholder is viewed as a third party.

A shareholder or former shareholder can bring an action against a director for breach of a duty owed to them as a shareholder. The relevant duties for these purposes are to maintain proper share registers, to disclose the director’s interest in a transaction with the company, or to disclose any share dealing by the directors.

For a breach of these duties, a shareholder or former shareholder may bring a personal action against a director or a company.

The Court will also grant leave to a shareholder or director of a company to bring a derivative action on behalf of the company where the action is brought bona fide and in the best interest and for the benefit of the company and for wrongs done to the company for which no other remedy is available. Consequently, if the action is brought for an ulterior motive or where there are alternative remedies, leave would not be granted. Case law indicates however that, in respect of breach of fiduciary duties, a derivative action may be justified even though there is only a suspicion that the director(s) have breached their statutory duties.

The liability of the directors may only be enforced by resolution of the general shareholders' meeting. That is, the shareholders must call for a meeting at which the liability of the director must be discussed and, once acknowledged by the shareholders, the meeting must decide whether or not to proceed with a liability claim against the director(s).

Shareholders representing at least 25% of the capital stock, may directly bring a civil liability action against the directors, provided that the following requirements are met:

• The claim must include the total amount of the liabilities in favor of the company and not only the personal interest of the petitioners.
• That, if applicable, the petitioners have not approved the resolution adopted by the general shareholders' meeting waiving the right to proceed against the defendant directors.

Additionally, any breach of the duty of loyalty may give rise to criminal penalties of up to 12 years’ imprisonment for the offender.  Fraudulent management is also considered to be criminal conduct and, therefore, may attract a 10-year imprisonment penalty.

According to the LMV and the LRAF, among others, all directors may be liable if:

• they abstain from attending, unless there is a justified cause in the opinion of the shareholders' meeting, the meetings of the board of directors and, if applicable, the committees of which they are members, and that due to their non-attendance the board in question cannot legally meet;
• they fail to disclose to the board of directors or, as the case may be, to the committees of which they are members, relevant information known to them which is necessary for proper decision‑making in such corporate bodies, unless they are legally or contractually obliged to keep such information secret or confidential;
• they fail to comply with the duties imposed by the Securities Market Law or the bylaws of the company.

If found liable, they may be required to indemnify the company (and/or the legal entities it controls or in which it has a significant influence) for damages caused by their lack of diligence detailed above.

There are four cases under Moroccan law which are likely to engage the civil liability of the general managers.

• Violations of laws and regulations. The civil liability of the Legal Representatives may be incurred as a result of infringements of legal or regulatory provisions applicable to PLCs. This may include, in particular, failure to comply with the rules for convening and holding shareholders' meetings, failure to comply with obligations relating to the disclosure of corporate documents, failure to comply with the procedure applicable to regulated agreements, and irregularities in the keeping of corporate accounts or in the distribution of dividends.
• Non-compliance with the articles of association. Compliance with the company's articles of association is mandatory for the general managers. A breach of any provision in the articles of association limiting their powers is not enforceable by third parties and the company remains committed by the actions of its legal representative. Examples include exceeding the corporate purpose, failure to comply with limitations on powers or statutory deadlines for convening meetings, or failure to comply with restrictions applicable to transfers of shares or corporate units.
• Liability for mismanagement. It should be noted that the concept of mismanagement has not been defined by the Moroccan legislator and its interpretation is therefore left to the judges of the court of first instance. Mismanagement can take a variety of forms. It can include positive faults (unfair competition, presentation of inaccurate accounts, etc.) or faults of abstention (insufficiency in the supervision of the executive bodies, of the salaried personnel and of the accounting, etc.) which would not have been committed by a diligent, prudent, attentive, active and scrupulous manager placed in the same situation, and which are prejudicial to the interests of the company. The liability of legal representatives for mismanagement is generally understood to be a contractual liability that must be assessed in accordance with the general rules of agency set forth in Moroccan law.
• Liability for actions taken outside the interest of the company. The general managers may be held liable for any act taken outside the interest of the company.  An act can be defined, in a common sense, as any act or a failure to act, whether intentional or not. Thus, the general managers are not only liable for mismanagement but also for errors in management. Further, Moroccan law specifies that even if they did not participate in the relevant acts, they will be declared responsible if they did not reveal them at the next general assembly after they had knowledge of them. 

There are three actions that can be taken to hold the general managers liable:

• An individual action for compensation for damage suffered personally by a shareholder/partner or by a third party, distinct from any damage suffered by the company. In a PLC, if several shareholders have personally suffered a prejudice due to the same facts, they can group together and give a mandate to one of them to act in court on their behalf.
• A corporate action (ut universi) brought by the company against the general managers and which is brought by the new general or the general managers whose liability is not in question.
• A social action (ut singuli) exercised by the shareholders/associates aiming at repairing the damage caused by the general managers to the company. The implementation of this action necessarily requires the implementation of a corporate action as well. Any damages will be awarded to the company.

As a general principle, a director shall be held liable to the company for any damage caused to it by an act or omission which is in breach of the director’s legal duties or the duties arising from the articles of association, save if the director proves that they acted without fault. A director is also liable:

• to the creditors of the company when, due to non-compliance with a legal or statutory provision, mainly or exclusively designed for the protection of the company’s creditors, the corporate assets become insufficient to satisfy the creditor´s claim;
• to the shareholder, the company or third party for damages caused directly to any one or all of them in the exercise of their office; and
• if they perform, enter into or do not prevent, when able to do so, the performance or execution of any act or contract imposed by a controlling shareholder that uses its controlling power in a way that harms the company or the other shareholders.

In addition to the civil liability described above, if a company´s unlawful act is a crime under the Penal Code or other relevant legislation, the directors may also be held liable for such criminal acts.

A lawsuit against the directors can be brought by the company, the company´s shareholders and/or the company´s creditors. Also, any third party that has suffered damage caused directly by the exercise of the directors’ functions may start a lawsuit against the directors.

In addition, the New CCom introduces a chapter on penalties applicable to directors for breach of general duties. Under the New CCom, fines (which can be substantial) can be imposed on a director who:

• omits or causes to be omitted by another person acts that are necessary for the payment of contributions of capital;
• in violation of the law, subscribes or acquires for the company quotas or shares of the company, or instructs another person to subscribe or acquire quotas or shares of the company on behalf of the company, even if in their own name, or in any way provides funds or guarantees for the company so that another person may subscribe or acquire quotas or shares representing the company´s share capital;
• in violation of the law, redeems, totally or partially, a quota that has not been paid up, or redeems or causes to be redeemed a quota or share, totally or partially, without proceeding with the reduction of the share capital of the company, or with the use of funds that cannot be distributed to the shareholder for such purpose;
• in violation of the law, redeems, or causes to be redeemed, totally or partially, a quota or share over which there is a usufruct or pledge right, without the consent of the holder of such right;
• proposes the illicit distribution of company´s assets for approval by the shareholders, convened in a General Assembly, or who executes or causes to be executed by a third party distribution of the company´s assets in violation of a valid resolution of the General Assembly;
• has responsibility to convene the General Assembly of shareholders or of bondholders, who omits or causes the convening of the meeting by others within the time limits established in law or articles of association, or convenes the meeting or causes the meeting to be convened without complying with the time limits or formalities established by law or by the articles of association;
• appoints another person to represent them as the holder of quotas or shares or bonds, without such person being the rightful holder of such quotas, shares or bonds, or as the holder of representative powers, without such person having been conferred with such powers;
• refuses or causes others to refuse to provide documents which the law states should be made available to interested parties for the preparation of General Assemblies, or refuses to send or causes the sending of such documents to be refused, or sends or causes the sending of such documents without compliance with the conditions and time limits established by law;
• prevents or hinders, or procures another person to prevent or hinder, the supervision of those who, by law or by the articles of association or by judicial order, have the duty to exercise such supervision;
• for the relevant accounting period verifies that half of the capital is lost and does not propose the dissolution of the company or the reduction of its share capital;
• being an interested party in a transaction with the company, fails to make a declaration of such interest;
• consents and signs, with their signature, a provisional or definitive certificate of shares or bonds, issued by or on behalf of the company, when the issue was not approved by the competent corporate body;
• fails to submit or instructs another not to submit to the competent corporate bodies, within the legally established time limit to do so, the administration report, the accounts for the accounting period and other accountability documents prescribed by law.

As an accessory penalty, a director convicted of any of the above may be prohibited from holding the office of director or any other management office for a period of between one to three years.

The prohibition on holding the office as director or any other management office is applied when:

• the director breached their duties with serious prejudice to the company;
• the director breaches the provisions of articles 139 and 140 of the New CCom (which, among other things, require a director to observe the duty of care and act with the diligence of a judicious and orderly manager; to observe the duty of loyalty in the company´s interest, taking into account the interests of the shareholders and weighing the interests of other relevant parties for the sustainability of the company, such as its employees and creditors; and to report the management activities and the company´s accounts as prescribed by law, etc;
• the director is convicted of providing false information;
• the director is convicted for failing to disclose interests in a transaction with the company; and
• the director repeatedly breaches its duties.

A director that breaches their fiduciary duties is liable for a breach of trust. A breach of fiduciary duties may also lead to criminal liability.  The company itself, the other directors or the members may bring an action to court for breach of trust.

When a director breaches the duty of care, skill and diligence, they may be held liable for damages suffered by the company. If there is a contract between the director and the company incorporating the duty of care, skill and diligence, the director may be held liable for breach of contract as well.  The company is the proper plaintiff for such an action, but a derivative action by the members is also possible. 

As a starting point, directors are not liable for acts performed in their capacity as directors on behalf of the company. However, there are specific principles under Dutch law pursuant to which a director could be held personally liable. A distinction should be made between internal and external liability:

• Internal liability is liability towards the company and is based on the relationship between the director(s) on the one hand and the company on the other hand. Generally, a director can only be held liable internally for improper performance of duties in the event of serious negligence (ernstig verwijt). Whether serious negligence can be established should be assessed on the basis of all particular circumstances.
• External liability is liability towards third parties, such as creditors of the company or the Dutch tax authorities. A director is generally at fault when they have procured the performance of a legal act on behalf of the legal entity in circumstances where they knew, or reasonably should have known, that the legal entity concerned would not be able to meet its obligations. The liability can also be based on an omission.

Under Dutch law, it is not possible for shareholders to bring an action for breach of duty on behalf of the company (a derivative action).

Note that in the event that the relevant director is a Dutch legal entity, the person(s) managing the legal entity director shall also be jointly and severally liable in accordance with the DCC if the legal entity director is successfully held liable.

Directors generally owe their duties to the company itself and not to the parent or other group companies, individual shareholders or creditors.  Therefore, in most situations only the company can bring an action for breach of duty against a director.

However, a shareholder or director is able to bring an action for breach of duty on behalf of the company (known as a “derivative action”) in certain circumstances.  In order to bring a derivative action, the shareholder or director must apply to the courts for leave to bring proceedings in the name of the company. 

In determining whether to grant leave, the court will have regard to:

• The likelihood of the proceedings succeeding.
• The costs of the proceedings in relation to the relief likely to be obtained. 
• Any action already taken by the company to obtain relief. 
• The interests of the company in the proceedings being commenced, continued, defended or discontinued, as the case may be.  

In addition, leave to bring proceedings may only be granted if the court is satisfied that:

• the company does not intend to bring, diligently continue to defend, or discontinue the proceedings, as the case may be or
• it is in the interests of the company that the conduct of the proceedings should not be left to the directors or to the determination of the shareholders as a whole. 

A court may make any order it thinks fit in relation to proceedings, including, damages, recovery of misapplied property (including the payment of unlawful dividends), accounting for profit made in breach of duty, an injunction to prevent breach and rescission of a contract.

In addition to the above, a shareholder or former shareholder may bring an action against a director for breach of a duty owed to them as a shareholder.  Such duties would include supervising the share register, disclosing interests and share dealings.  No action may be brought against a director to recover any loss in the form of a reduction in the value of shares in the company or a failure of the shares to increase in value by reason only of a loss suffered, or a gain foregone, by the company.

Generally, only the company can bring an action to enforce a director’s duty or remedy its breach, as directors owe their duties to the company itself and not directly to the company’s shareholders or creditors. 

However, shareholders are permitted to sue directors for breach of duty on behalf of the company by way of a derivative action, under certain circumstances.  To do so, court approval to proceed with a derivative action must be sought by the shareholders.

A range of remedies in favour of the company are available against a director for breach of duty including suing for negligent performance, damages, recovery of misapplied property, accounting for profit made in breach of duty, restitution, injunction to prevent breach and rescission of a contract.

The company, a shareholder or others may hold the general manager and/or a member of the board of directors personally and jointly liable for any damage which they, in the capacity mentioned, have intentionally or negligently caused such party.

Members of the board of directors or a general manager who intentionally or negligently infringe any provision issued in or pursuant to the Norwegian Private Limited Liability Companies Act may be punished by fines or in aggravating circumstances by imprisonment for up to one year. Complicity will be similarly punished.

Directors shall be liable, jointly and severally, to the company, shareholders and third parties for damages caused by agreements or acts contrary to the law or the bylaws or caused by those made intentionally, with abuse of authority or gross negligence.

The directors are also jointly and severally liable along with the directors that have preceded them for irregularities they have committed if, being aware of them, they had not denounced them in writing to the general meeting.

Likewise, the board is responsible for the compliance with resolutions of the general shareholders meeting, unless the board provides otherwise for specific cases.

Each of the management board members may be liable to the company if they cause damage to the company by an act or omission which is unlawful or which is contrary to the company’s articles of association.

Furthermore, management board members who are responsible for the distribution of dividend in a way which is contrary to the law or the articles of association may be liable jointly and severally with the recipient (shareholder) and required to reimburse it to the company.

In the abovementioned instances, the company may bring an action for a breach of duty against such management board members.

As an exception, where the management board member provided, intentionally or negligently, false information in the statement on the contributions made to pay for any newly created shares (in the event of a capital share increase), such member may be liable towards the company's creditors jointly and severally with the company for a period of three years following the registration of the share capital increase. Such liability is caped to the increased amount.

Based on general rules, a company may seek a range of remedies against a management board member for a breach of duty including damages, recovery of misapplied property, an injunction to prevent breach and rescission of a contract.

Directors are severally liable towards the company for the damages caused to the company as a result of their actions or omissions that are not compliant with their legal statutory or contractual obligations, unless they prove that their actions/omissions were not caused with intentional or negligent misconduct.

Director’s liability may be excluded in specific cases provided by law.

The directors may be subject to criminal liability.

• A lawsuit against the directors may be brought by:
• The company – in this case a shareholder’s resolution to bring the lawsuit must be approved by the majority of the shareholders, and the lawsuit must be sought within six months from the date of such resolution.
• In the absence of a lawsuit sought by the company, one or more shareholders who jointly own, at least, 5% of the share capital (or 2% in the case of a company with shares admitted to trading on a regulated market) may bring a liability suit against the directors to claim reparation for damages caused to the company.

A company may seek a range of remedies against a director for breach of duty including damages, recovery of misapplied property, accounting for profit made in breach of duty, an injunction to prevent breach and rescission of a contract.

In certain circumstances directors may face liabilities where they have acted unlawfully, including:

• Errors and omissions in the management of the company.
• Disclosing corporate secrets.
• Participating in a competing business.
• Fraud and embezzlement, misuse of power, violation of the Qatar Companies Law.
• Act carried out in the course of their duties which causes harm to another person.
• Exceeding authority.
• Unlawful competition.
• Issuing a cheque with insufficient funds.
• Certain violations under the Qatar Commercial Law such as deliberately giving a bankruptcy judge false data, selling goods at less than their regular price with the purpose of delaying the company’s declaration of bankruptcy and engaging in transactions in defrauding creditors.

Depending on the nature of the unlawful act, action can be taken against a director for breach of legislation (including the Qatar Companies Law, Civil Code, Penal Code, Commercial Code or Bankruptcy Law) or breach of the LLC’s memorandum of association.

Under Romanian law, the failure of directors to fulfil their duties may trigger both civil or criminal liability.

Civil liability

The directors' civil liability may be held both towards the company and its shareholders and towards third parties.

Civil liability towards the company and its shareholders

Directors are liable for breach of their duties under the Company Law, the AoA and the shareholders' resolutions, such as breaches resulting from the transfer of powers to other persons without being permitted to do so and acts exceeding the limits on the powers granted to the directors by way of the AoA/shareholders' resolutions, etc.

As a general rule, each director is to be held civilly liable only for the damages which that director has personally caused to the company or to the shareholders. By way of exception, the Company Law expressly provides for certain situations where directors are to be held jointly liable, towards the company, as follows:

• The existence and accuracy of payments made by the shareholders.
• The true existence of the paid dividends.
• The existence of the registries required by law and their accurate keeping.
• The correct fulfilment of the resolutions of the GMS.
• Strict compliance with the obligations prescribed by the law and the AoA.

If the directors exceed their powers when acting in relation with third parties and provided that the agreement concluded as such could be considered binding and valid with regards to the company, the company is entitled to claim compensation from the respective directors for the damages incurred as a result of such act.

Civil liability towards third parties

In the event that third parties were aware or, given the circumstances, should have been aware that the directors were acting without proper corporate authority, or if the directors exceeded the powers conferred to them by the law, and the agreement concluded as such could not be considered binding and valid with regards to the company, third parties would be entitled to claim damages from the directors as if they acted in their own name.

Criminal liability

The Company Law provides for a number of criminal offences applicable to directors. However, if the actions of such directors may qualify as offences more serious than those provided in the Company Law, the provisions of the Romanian Criminal Code become applicable. Moreover, directors may be held liable for offences under other special laws.

The director committing a criminal offence provided by the Company Law can be imprisoned (for a minimum of one month and a maximum of five years) or may be ordered to pay a fine. The amount of the penalty differs for each type of criminal offence. The criminal offences regulated under the Company Law refer mainly to breaches of the directors' duties, such as:

• Providing misleading information to the shareholders/the public in relation to the financial status, economic or legal standing of the company.
• In certain cases, benefitting in any form, directly or through an intermediary, from loans or guarantees granted by the company managed by the director (or by a company controlled by or controlling the company managed by the director).
• Collecting or paying dividends, in any form, out of fictitious profits or which could not have been distributed, in the absence of a financial statement or contrary to the results thereof.
• Violating the provisions of the Company Law which state that at least 5% of the company’s profits must be set aside each year for the purpose of establishing a reserve fund until such fund reaches a minimum of 20% of the share capital.
• Failure to convene the GMS in the cases provided by the law etc.

Depending on the nature of the breach, action can be taken against a director for breach of law or breach of the LLC's articles of association by the company, its shareholders or third parties.

The shareholders representing a quarter of the shares may, either individually or in a group, institute a corporate action for liability against the director.

They are entitled to claim compensation for the entire damage suffered by the company, for which, if necessary, damages are awarded.

Directors owe their duties to the company itself and not directly to the parent or other group companies, individual shareholders or creditors. Therefore, only the company can bring an action for breach of duty against a director.

However, shareholders are able to bring an action for breach of duty on behalf of the company (a derivative action) in certain circumstances. Broadly, a shareholder must first obtain the court's permission to proceed with a derivative action and the court will take into account a number of factors when deciding whether to grant this permission – including whether the shareholder is acting in good faith and whether it appears to be in the best interest of the company for the permission to be granted. Notwithstanding, a shareholder (who is acting on the company’s behalf with the court’s permission) will not benefit directly and personally from a derivative action as any damages or remedies awarded will be payable to the company.

A company may seek a range of remedies against a director for breach of duty including damages, recovery of misapplied property (including the clawback of unlawful dividends declared), accounting for profit made in breach of duty, an injunction to prevent breach and rescission of a contract.

Directors who breach their obligations while exercising their powers are obliged to jointly and severally compensate the company for the damage caused.

According to the Slovak Commercial Code, the directors are not liable for damage if they can prove that they exercised their powers with professional care and in good faith and that they were acting in the company’s interest. Directors are not liable for any damage caused to the company by executing a decision of the general meeting; however this does not apply if the general meeting’s decision is contrary to legal regulations, the Articles of Association or if it concerns the obligation to file the petition for bankruptcy.

Claims for damages of the company against its directors may be exercised on behalf of the company by each shareholder. Such claims may be also be exercised by a creditor of the company that is unable to satisfy its receivable from the company’s property.

Directors owe their duties to the company itself and not directly to the parent or other group companies, individual shareholders or creditors.  Therefore, only the company can bring an action for breach of duty against a director.

However, the South African Companies Act does make provision for civil claims to be instituted by third parties against directors (and others) in respect of breaches of the Act if that third party (including a shareholder) is able to prove it suffered a loss due to the breach.  Recent case law suggests the courts will recognise the rights of creditors and other third parties to bring such claims, but will not recognise shareholder rights to do so. 

Generally directors are liable to the company for any losses, damages or costs sustained by the company as a direct or indirect consequence of the director having breached their duties and obligations.

Directors shall be liable to the company, shareholders and creditors, for the damage caused by their acts or omissions against the law or the company’s bylaws or for those incurred in breach of their duties, provided that there is fraud or negligence. Guilt shall be presumed, unless proven otherwise, when the act is contrary to the law or the company’s bylaws.

All the members of the management body that execute the damaging act or adopt the damaging resolution are, in principle (the opposite can be proved), jointly and severally liable.

The director shall not be exonerated from liability to the company and shareholders when the act causing the damage has been adopted, authorised or ratified by the general shareholders meeting. In addition, the liability of the directors also extends to the de facto directors. To this end, a person who actually performs the functions of a director in the business without a title, with a title that is null or extinguished, or with another title, as well as a person under whose instructions the directors of the company act, is considered a de facto director.

There are two main legal actions against directors:

• Corporate liability claim (acción social de responsabilidad). This action is taken by the company or by the shareholders under certain circumstances and, on a subsidiary basis, in the absence of a corporate claim by the company or by its shareholders, by creditors to compensate the damages caused to the company insofar as the company's assets are insufficient to meet their claims.
• Individual liability claim (acción individual de responsabilidad). This action allows the shareholders and third parties to take legal action for acts carried out by directors that directly harm their interests.

If directors neglect any of their duties, they are personally and jointly liable to the company for the damages caused by the neglect.

A director may also be liable towards shareholders and third parties in case of breaches of the Swedish Companies Act, the company's articles of association or the Swedish Annual Reports Act, for damages caused due to negligence or intent.

Shareholders are able to bring an action for breach of duty either on behalf of the company or in their own name in certain circumstances. Broadly, it requires that the majority or a minority comprising owners of at least one-tenth of all shares in the company has supported a general meeting resolution intending to bring an action for damages or has voted against a resolution on discharge from liability.

A company may seek a range of remedies against a director for breach of duty including damages, recovery of misapplied property (including the payment of unlawful dividends), accounting for profit made in breach of duty, an injunction to prevent breach and rescission of a contract.

In addition, the management of a company may be held personally liable for unpaid taxes in certain situations. A board member or managing director who intentionally or through gross negligence has failed to pay the company's taxes may, jointly with the company, be held liable for the company's taxes and the interest accrued. In these circumstances, gross negligence is not a particularly high standard; it is more akin to a negligence standard.

Directors owe their duties to the company itself and not directly to the parent or other group companies, individual shareholders or creditors.  Therefore, only the company can bring an action for breach of duty against a director.

However, in some circumstances it is also possible for shareholders to bring an action in the name of the company, known as a “derivative claim” by obtaining the court’s permission.

The right for a shareholder to bring a claim on behalf of a company applies in respect of any actual or proposed act or omission involving negligence, default, breach of duty or breach of trust by a director of the company. It is important to note that the right belongs to any shareholder, irrespective of the number of shares held by that shareholder and whether the action complained of occurred before or after they became a shareholder.

Claims may be brought against former directors as well as current directors. In this context, it should be emphasised that this is not a right for shareholders to recover damages directly against directors - it is a right to pursue an action on behalf of the company where the company has suffered or may suffer from a director’s negligence or breach. Consequently, any financial benefit from the litigation would go to the company, not directly to the shareholders conducting the claim.

The risk of litigation is substantially reduced, however, by the hurdles built into the derivative claims procedure to prevent inappropriate litigation. Permission must be given by the court for claims to proceed, and the way in which the court’s discretion in this area is exercised is therefore important. A key feature of the procedure is the ability of the court to take into account a number of factors when deciding whether to grant this permission – including whether the shareholder is acting in good faith, the views of independent shareholders and whether the company is likely to ratify or authorise the act or omission giving rise to the claim.

Remedies against a director for breach of duty include damages, recovery of misapplied property (including the payment of unlawful dividends), accounting for profit made in breach of duty, an injunction to prevent breach and rescission of a contract.

According to the law, the manager(s) is/are individually or jointly and severally liable to the company or to third parties  for violations of the legal provisions applicable to limited liability companies, for violations of the bylaws, or for faults committed in their management of the company. If the facts giving rise to liability are the work of several managers at the same time, the court is responsible for determining the contributory share of each of them in the award of compensatory damages.

A liability action against a manager takes the form of either an individual action or a social action.

In an individual action, a shareholder or a third party can bring a liability action in order to seek reparation for a prejudice suffered personally because of a fault committed by the manager. When the action is brought by a third party, the third party must prove that the fault committed by the manager is not related to their function as a manager of the limited liability company.

A social action can be exercised in order to obtain the repair of a prejudice suffered by the company. It can be exercised by one of the legal representatives of the company, for example a manager against a co-manager. The law also specifies that shareholders representing a tenth of the social capital, can by grouping together bring the social action against the manager(s) responsible for the damage.

These liability actions must be commenced within three years of occurrence of the damaging fact, or if it was concealed, from the date it became known. Criminal actions must be commenced within ten years.

As a general rule, only a company can bring an action for breach of duty against its director. However, shareholders may petition in cases of oppressive or unfairly prejudicial conduct of the company’s affairs upon which the court or registrar may issue any order:

• regulating the conduct of the company’s affairs in the future,
• requiring the company to refrain from doing or continuing the act complained of,
• authorising civil proceedings to be brought in the name and on behalf of the company, or
• providing for the purchase of the shares of any members of the company by other members or by the company itself.

Shareholders, creditors and the registrar can also commence court action against directors for failure to comply with registration requirements and obtain an order compelling them to file necessary documents.

Onshore UAE

In certain circumstances directors may face liabilities where they have acted unlawfully, including:

• Disclosing corporate secrets.
• Participating in a competing business.
• Fraud and embezzlement, misuse of power, violation of the UAE Companies Law or the company's memorandum and gross error/mismanagement.
• Any act carried out in the course of their duties which causes harm to another person.
• Exceeding authority.
• Unlawful competition.
• Issuing a cheque with insufficient funds.
• Certain violations prescribed under the law (such as, the Federal Environmental Law, the Federal Labour Law, etc.).
• Certain acts in the event of a company's bankruptcy, such as engaging in transactions defrauding creditors.

Depending on the nature of the unlawful act, action can be taken against a director for breach of legislation (including the UAE Companies Law, Civil Code, Penal Code, Commercial Code or Bankruptcy Law) or breach of the LLC's memorandum of association.

Dubai International Financial Centre

Pursuant to the DIFC Companies Law, a breach by a director of any one or more of the duties set out in the Law shall constitute a contravention by that director of the relevant duty. On this basis, the company may bring action against the director.

Where it is apparent to the DIFC Registrar of Companies that a director should not hold office, they may apply to the DIFC Courts for an order against that director. This consideration is based on whether the director has breached any of the duties prescribed in the Law or the Registrar of Companies has otherwise determined, based on the given circumstances, that a director is unfit to be involved in the management of a company.

Remedies may be sought against the director by filing a claim with the DIFC Courts. These may include remedies against a director for breach of duty including damages, recovery of misapplied property (including the payment of unlawful dividends), accounting for profit made in breach of duty, an injunction to prevent breach and rescission of a contract.

Directors owe their duties to the company itself and not directly to the parent or other group companies, individual shareholders or creditors.  Therefore, only the company can bring an action for breach of duty against a director.

However, shareholders are able to bring an action for breach of duty on behalf of the company (a derivative action) in certain circumstances.  Broadly, a shareholder must first obtain the court's permission to proceed with a derivative action and the court will take into account a number of factors when deciding whether to grant this permission – including whether the shareholder is acting in good faith, the views of independent shareholders and whether the company is likely to ratify or authorise the act or omission giving rise to the claim.

A company may seek a range of remedies against a director for breach of duty including damages, recovery of misapplied property (including the payment of unlawful dividends), accounting for profit made in breach of duty, an injunction to prevent breach and rescission of a contract.

Generally, a company (directly) or its stockholders (derivatively, on behalf of the company) may bring an action against a director for breach of fiduciary duty of care or loyalty. The court has broad powers to grant remedies for a breach of fiduciary duty, which can include requiring the rescission of a transaction or the payment of monetary damages.

Directors owe their duties to the company as they act as agents, therefore only the company can bring an action against a director where they act in an ultra vires manner.

When a director acquires or disposes of shares or debentures, in contravention of the Companies Act, the director shall be liable to the person who, or from whom, the shares or debentures were acquired or disposed to, for the amount by which the consideration received by the director exceeds the fair value of the shares or debentures.

The Companies Act also provides that where a director of a company wilfully commits a breach of any duty or responsibility specified in the Companies Act, the director:

• is liable to compensate the company for any loss the company suffers as a result of the breach
• may be removed from the board of directors, and
• is liable to account to the company for any profit made as a result of the breach.

Further, a contract or other transaction entered into between a director and the company in breach of any duty of the director, may be rescinded by the company.

Additionally, the Companies Act provides that where a company establishes that a decision made by an officer is not valid, the officer shall be held personally liable for any obligation or liability that arises as a result of that decision. If the decision is valid, the officer shall be indemnified for that decision.

A member of a company (a shareholder) may bring a legal action against the directors or managers of a company. The shareholder must establish that:

• The managers or directors, or the member, of the entity are deadlocked, whether because of even division in their number or another reason, and irreparable injury to the company is likely to be caused to the business or the business can no longer be conducted to the members’ advantage due to that deadlock. 
• The managers, directors, or any other persons in control of the entity have acted illegally, fraudulently, oppressively, recklessly or with gross negligence toward the petitioning member.
• A shareholder may bring a claim of personal damages against a director or manager who fails to exercise the duty of care and duty of loyalty as enshrined in the COBE. The damages to be claimed may be for harm caused to the member by the conduct of the manager or director.