Duties and obligations of directors

Each director must act, at all times, in good faith and in the company’s interest. They must act independently and exercise their duties with reasonable care, skill and diligence and avoid any potential conflict of interests. Each director has also a duty of confidentiality in respect of all the board’s proceedings.

Additionally, a director is responsible for:

• Definition of the company's strategy.
• Appointment of the corporate officers in charge of managing the company on a day-to-day basis within the framework of the defined strategy.
• Supervision and control of the executives.
• To ensure the quality of the information provided to shareholders and the markets through the financial statements or the quality of the information provided to shareholders and the markets through the accounts or on the occurrence of major transactions.

Under Australian law, directors are subject to statutory duties (under a range of statutes) as well as general law duties.  There is significant overlap between these duties.

The Act sets out some of the key statutory duties of a director.  These include:

• Act with a reasonable degree of care and diligence.  There is an ongoing obligation to maintain a basic understanding of the company’s activities, size, distribution of functions and monitor its financial position to ensure that it does not trade while insolvent.
• Act in good faith, in the interests of the company and for a proper purpose. Additional consideration must be given to nominee directors in joint ventures. The relationship of wholly-owned subsidiary and corporate group is discussed below.
• Misuse of position.  Not improperly use their position to gain advantage for themselves or another person or cause detriment to the company.
• Misuse of information.  Not improperly use information to gain advantage for themselves or another person or cause detriment to the company (this duty continues after the director leaves office).
• Disclose to fellow directors any material personal interest in matters relating to the affairs of the company.  Depending on the type of company and the requirements set out in its constitution (if the company has one), a director may not be permitted to be present when a matter in which they have a material personal interest is discussed, or vote on the matter.
• Insolvent trading.  Directors have a duty to prevent insolvent trading by their company, and can be held personally liable for the company's debts if they allow the company to trade while it is insolvent or its insolvency would have been objectively suspected.  Insolvency occurs when a company is unable to pay its debts as and when they fall due. Insolvent trading occurs when a company incurs a debt whilst insolvent or becomes insolvent by incurring the debt.

In addition, directors have both equitable and common law duties, including:

• Act in good faith and in the best interests of the company.  Good faith has both subjective and objective elements, in that a director must genuinely believe they are acting in the company’s best interests and must also act in a way that an honest and reasonable director would.
• Exercise powers for a proper purpose.  In determining what is a proper purpose, the purpose motivating the exercise of power must accord with the objective purpose for which the power was granted.
• Not fetter their own future discretion.  A director must exercise active discretions and not improperly limit their decision-making authority (but this does not prevent delegation by directors).
• Avoid conflicts of interest and duty.  If a director must choose between favouring their own interests and the interests of the company, the director must usually choose the latter.  A director should avoid actual and perceived conflicts.

The key duties of a director are set out in the Act on Limited Liability Companies (the Act):

• The managing directors owe a duty to the company to exercise the care of a prudent business person in their management of the company.
• A managing director is deemed to act with the diligence of a prudent business person if, in making a business decision, the director is not guided by extraneous interests and it can be assumed, on the basis of adequate information, that they are acting in the best interests of the company.
• The managing directors must ensure that an accounting system and an internal control system are maintained which meet the requirements of the enterprise.
• Copies of the annual financial statements, including the management report, and of the consolidated financial statements, including the group management report, must be sent to each shareholder without delay after their preparation.
• In the interests of the company, the directors are required to convene shareholders' meetings whenever they deem it appropriate.

The key general duties of directors are to:

• Act within their powers.
• Promote the success of the company.
• Exercise independent judgment.
• Exercise reasonable skill care and diligence.
• Avoid conflict of interests.
• Declare interests in proposed transactions and arrangements.

There is no exhaustive list laid down in law of the key duties of directors. The law merely states that the management organ of a company has, through its director(s), the (residual) power to perform all acts necessary or useful for the realisation of the object of the company, except those for which the general shareholders’ meeting is authorised by law. In fact, directors are responsible for both the strategy as well as the overall monitoring of the organisation.

The management duties can in general be described as follows:

• Duty of care and duty of loyalty. The directors have a general duty of care, meaning that they must be diligent in the performance of their tasks and (actively) participate in board meetings. They are required to manage the company's business and affairs to the best of their ability and in the best interest of the company. They also have a duty of loyalty towards the company which encompasses both a duty of confidentiality and a duty not to compete with the company.
• Decision making with respect to the general strategy of the company and acting as a reasonable, prudent and diligent person. Directors have to act within the company's interest and exercise their powers for the purposes for which they were given and not for any collateral purpose.
• Financial duties. As part of its financial duties, the management organ is in charge of the drafting of the annual accounts and the management report.
• Operational duties. As part of its operational duties, the management organ enters into agreements with third parties, grants special powers to special proxy holders and supervises them.
• Convening of and reporting to the general shareholders’ meeting. The management organ convenes the general shareholders’ meeting at least once a year and replies to questions of the shareholders at the general shareholders' meeting. The management organ is obliged to convene a general shareholders' meeting if the shareholders who represent one tenth of the company's shares/share capital request a general shareholder's meeting.

The key duties of a director are set out in the Companies Act. These are duties:

• To act in good faith and the best interest of the company. It shall be the duty of the director to exercise their powers in accordance with the  Act and with the limits and subject to the conditions and restriction established by the company’s constitution where applicable.
• Not to agree to the company incurring any obligations unless the director believes at the time, on reasonable grounds that the company will be able to perform the obligations when it is required to do so.
• To obtain the authorisation of a general meeting before doing any act or entering into any transaction for which authorisation or consent of a general meeting is required by the Act or by the company’s constitution.
• To act with reasonable care, skill and diligence. To exercise the degree of care, diligence and skill that a prudent person would exercise in comparable circumstances.  
• Not to use any assets of the company for any illegal purpose and not to do, or knowingly allow to be done, anything by which the company’s assets may be damaged or lost (otherwise than in the ordinary course of carrying on its business).
• To avoid conflicts of interest. A director has an obligation to the company not to compete or become a director or officer of a competing company, unless it is approved by the company with the knowledge of all the facts.
• To attend meetings of the directors of the company with reasonable regularity, unless prevented from doing so by illness or other reasonable excuse.
• Not to disclose any confidential information received by them on behalf of the company as directors otherwise than as permitted by law and in accordance with the Act.
• To transfer forthwith to the company all cash or assets acquired on its behalf (whether before or after its incorporation) or as the result of the employment of its cash or assets, and until such transfer is made to hold such cash or assets on behalf of the company and to use it only for the purposes of the company.

In addition, directors have duties under common law, for example not to misuse the company's property and to keep company information confidential and only use it for the benefit of the company.

Directors must exercise their functions in accordance with their fiduciary duties. Their main duties are:

• Duty to be informed (and the right to request certain information).
• Duty of care (deber de cuidado). Directors are obliged to use, in the exercise of their functions, the care and diligence that people ordinarily employ in their own businesses (and shall be jointly and severally liable for any damage caused to the company and the shareholders). This corresponds to the ordinary standard of care (culpa leve) defined by Chilean civil law.

The duty of care obliges every director to regularly follow and decide about management issues (requesting all the information needed for this purpose, with the collaboration or assistance from management), to actively participate in the board and any committees, to attend  meetings, to request board meetings, to request that certain matters be reviewed by the board and to oppose illegal acts, among others.

• Duty of loyalty (deber de lealtad). This means placing the interests of the company (interés social) above their own interests, those of their related persons or those interests of those who appointed them as directors. It also includes:
  • Duty of confidentiality (deber de confidencialidad). The directors must keep confidential the business and corporate information to which they have access because of their position, and which has not been officially disclosed by the company.
  • Duty to respect the business opportunity of the company.

The director must be loyal to the company in the exercise of their functions and cannot compete with it or damage it with their actions.

A director is in charge of the company’s day-to-day business. The company's business management must be distinguished from the company's representation. While the representation of the company is carried out in relation to third parties, business management is directed inside the company and involves the management of the company, including decisions on business plans. In our view, business management does not include deciding on the long-term strategic plans of the company, as this decision must be taken by the General Meeting.

A director must ensure that the prescribed records and accounts are duly and properly kept and that a register of members is administered and, upon request, must inform the members about any company-related matters.

A director must file any changes to the articles of association to the Commercial Register.

A director must call upon the general meeting to convene at least once a year.

The board of directors is entrusted with the ultimate responsibility of the company as it has both the supervisory function of the executive board and the overall strategic responsibility of the company.

In general, the board of directors must at all times act with due care and diligence and in the best interests of the company.

The key duties of a director are set out in the Companies Act 2006 (the Act).  These are duties to:

• Promote the success of the company. Directors must act in the way that they consider, in good faith, would be most likely to promote the success of the company for the benefit of its members as a whole.

• Act with reasonable care, skill and diligence. Directors must meet the minimum standard of still and care expected of someone in their position and they must also bring to bear their particular skills and experience – therefore, the more qualified or experienced a director is, the greater the statutory standard required of them.
• Exercise independent judgement. However, a director may rely on other people (eg through proper delegation or by seeking advice) provided they judge that it is reasonable to do so.  A director may not usually limit their discretion.
• Treat the shareholders equally. The board or the managing director (or the general meeting) shall not make decisions or take other measures that are conducive to conferring an undue benefit to a shareholder or another person at the expense of the company or another shareholder.
• Act within the company's articles of association and exercise their powers for the purposes for which they were given and not for any collateral purpose.
• Disqualify from handling a matter with personal interest. A director shall be disqualified from handling a contract, transaction or litigation between the director and the company or the company and a third party, if the director is to derive a significant benefit in the matter and that benefit may be contrary to the interests of the company. Even if disqualified the director should declare relevant information about the matter to the company.

In addition, directors have duties, for example not to misuse the company's property and to keep company information confidential and only use it for the benefit of the company and not accept benefits from third parties to promote their interests in the company.

A director must exercise the powers conferred upon them (in the bylaws and the decision appointing them, as well as -as regards the President- pursuant to law) and act in the best interests of the SAS.

There is no specific statement of duties of a director under French law, except for the general duty of confidentiality.

In certain cases however, French courts have stated that directors should conduct the company’s business with due and reasonable care (gestion en bon père de famille).

In addition, certain restrictions exist so as to ensure that directors ensure that their duties towards the company do not conflict with their personal interests.

Organisational duties

• Duty to convene and prepare a Shareholders’ Meeting in the following circumstances:
  • The annual ordinary shareholders' meeting.
  • If a business decision falls within the competence of the shareholders’ meeting due to specific provisions in the articles of association (so called approval catalogue).
  • Extraordinary shareholders' meeting, if this is necessary in the interest of the company, in particular if the annual (or any interim) balance sheet shows that one half or more of the share capital has been lost.
•  Disclosure Obligation, Shareholders’ Directives
  • Obligation to provide each shareholder upon request with information about matters concerning the company and to allow them to inspect the books and documents of the company.
  • Obligation to comply with shareholders' instructions based on valid shareholders' resolutions.
• Responsibility for compliance with application and filing requirements towards the commercial register.

Duty of loyalty

The managing director has a duty of loyalty towards the company and a duty to exercise the diligence of a prudent business person. This duty arises from the extensive competences of the managing director and their access to the share capital of the company. In particular, the managing director is obliged:

• Not to disclose any business secrets or other confidential information about the company.
• Not to compete with the company.
• To return any personal advantages deriving from executed agreements to the company.

Other duties

• Preservation of the share capital.
• Accounting duties.
• Tax and social contributions.
• Obligations during crisis/insolvency.

Act 992 sets out the general and fiduciary duties of directors. A director must:

• Observe the utmost good faith towards the company in a transaction with or on behalf of the company because of the fiduciary relationship between the company and the director.
• Act in what the director believes is the best interest of the company as a whole so as to preserve the assets, further the business and promote the purposes for which the company was formed, in the manner that a faithful, diligent, careful and ordinarily skilful director would act in the circumstances.  In doing so, a director shall have regard to:
  • the likely consequence of any decision in the long term;
  • the impact of the operations of the company on the community and the environment, and
  • the desirability of the company maintaining a reputation for high standards of business conduct.

In considering whether a particular transaction or course of action is in the best interests of the company as a whole, a director may consider the best interests of the employees, as well as the members of the company and, where appointed by or as representative of a special class of members, employees, or creditors, may give special but not exclusive consideration to their interests. 

• Exercise independent judgment.
• Avoid conflicts of interest and duties to other persons. A director must refrain from placing (without the consent of the company) themselves in such a position that the director’s duty to the company conflicts with the director’s personal interest or duties to other persons. An example is being directly or indirectly interested in a business which competes with that of the company. This duty is not infringed if the transaction does not reasonably give rise to a conflict, has been authorised by the board of directors or has been consented to by company.
• Disclose to the board of directors the nature and extent of any interest that is likely to create a conflict of interest between that director and the company and register the interest in the Interests Register.
• Act in accordance with the constitution of the company and only exercise their powers for the purposes for which the powers are conferred.
• Not disclose to third parties or make use of company information received by the director in that capacity except for the purposes of the company or as approved by the company or as required by law or authorised by the constitution of the company.

Act 992 further preserves the common law and equity rules governing principal and agent in relation to officers of companies. Consequently, directors have duties under common law and equity as well, for example, to consider the interests of creditors when a company becomes insolvent.

As a general rule, directors of a company are subject to fiduciary duties imposed by common law as well as statutory duties imposed by various statutes (principally the Companies Ordinance (CO)).

Under the CO, a director has a duty to exercise reasonable care, skill and diligence. The CO provides that a director must take such actions as would be taken by a reasonably diligent person, having both:

• the general knowledge, skill and experience that may reasonably be expected of a person carrying out the same functions as are carried out by that director in relation to the company and
• the general knowledge, skill and experience of that particular director.

In addition, the CO requires a director to take all reasonable steps to ensure that proper books of account are kept so as to give a true and fair view of the state of affairs of the company.

Under the common law, the directors have a range of fiduciary duties. These include:

• Duty to act in good faith for the benefit of the company as a whole. A director has to act at all times in good faith and in what they consider as being in the best interests of the company assessed by reference to the interests of its present and future shareholders having regard to both their short and long-term interests. In cases where the interests of the present shareholders and those of the corporate entity differ, the interests of the corporate entity would generally prevail. This fiduciary duty is owed to the company alone, and not to any individual shareholder or even the majority shareholder of the company, or to its parent company or any other company within a group of which the director’s company is a member.
• Duty to use powers for a proper purpose for the benefit of shareholders of the company as a whole. The purpose of the exercise of the directors’ powers ought to be for the benefit of the company and not for any collateral purpose.
• Duty not to delegate powers except with proper authorisation and duty to exercise independent judgment. The company’s articles of association may allow its directors to delegate their powers by setting up local boards or committees for managing the affairs of the company. However, it should be borne in mind that the exercise of the power of delegation will not absolve a director from the duty to supervise and discharge of the delegated functions – the directors remain responsible notwithstanding the delegation.
• Duty to avoid conflicts between personal interests and the interests of the company. In the event that the interests of a director and that of the company conflict with each other, the latter will always prevail. A director should disclose any personal interest to the Board either at a directors’ meeting; by notice in writing and sent to the other directors or by general notice given at a directors’ meeting or in writing sent to the company.
• Duty not to enter into transactions in which the directors have an interest. A director is generally prohibited under common law from contracting directly or indirectly with the company except in compliance with the requirements of the law, for example, the approval of the shareholders following full disclosure.
• Duty not to gain advantage from use of position as a director. A director must not use their position as director for attaining direct or indirect gain/advantage for themselves or others or cause detriment to the company.
• Duty not to make unauthorized use of the company’s property or information. A director is prohibited from using the company’s information or property or exploiting opportunities to benefit themselves at the expense of the company and its shareholders.

Besides the above mentioned common law duties, the directors also owe an equitable duty of confidentiality to the company.

• To make all decisions related to the governance / strategic management of the company that are outside the powers of the general meeting.
• In performing their role, directors must always act in the interest of the company, and in line with the articles of association and the resolutions of the general meeting.
• To keep the shareholders informed in relation to the company and provide access to shareholders to the company’s documents, records and registers (subject to confidentiality obligations).

The BOD has the primary responsibility to run the company for the company’s best interests and in accordance with the company’s objects and purposes. The BOD shall perform this duty in good faith and with a sense of responsibility.

The key duties of a director are set out in the Companies Act 2014 (the Act).  These are duties to:

• Act in good faith in what the director considers to be the interests of the company.  Directors must act in the way that they consider, in good faith, would be most likely to be in the interests of the company, having regard (amongst other matters) to the interests of the company's employees and shareholders.
• Act honestly and responsibly in relation to the conduct of the affairs of the company.  This duty is consistent with the requirement for directors to declare their interests in any company transactions and to require shareholder approval for certain transactions which involve a director.
• Act in accordance with the company's constitution and exercise their powers for the purposes allowed by law. 
• Not use the company’s property, information or opportunities for their own or anyone else’s benefit unless this is expressly permitted by the company’s constitution or the use has been approved by a resolution of the company in general meeting.
• Not agree to restrict the director’s power to exercise an independent judgment unless:
  • this is expressly permitted by the company’s constitution
  • the director considers in good faith for that agreement to be in the interest of the company or
  • shareholders have approved that agreement. 

A director may not usually limit their discretion, however in certain circumstances they can do so.

• Avoid conflicts of interest.  Directors must not put themselves in a position where there is, or could be, a conflict between their personal interests or their duties to another person and the interests of the company (for example, where they are a director or employee of another company or where they may be in a position to take advantage of any property, information or opportunity they became aware of as a director).  This duty is not breached if the situation cannot reasonably be regarded as giving rise to a conflict of interest or if the situation has been authorised by the company’s constitution or by a members’ resolution (provided conflicted directors take no part in this decision).
• Exercise the care, skill and diligence which would be exercised in the same circumstances by a reasonable person having both:
  • the knowledge and experience that may reasonably be expected of a person in the same position as the director and
  • the knowledge and experience which the director has. 

Directors must meet the minimum standard of still and care expected of someone in their position and they must also bring to bear their particular skills and experience – therefore, the more qualified or experienced a director is, the greater the statutory standard required of them.

In addition, directors have duties under common law, for example not to misuse the company's property and to keep company information confidential and only use it for the benefit of the company.

There is no hierarchy to these factors and, where they conflict, a director will need to use their business judgement in weighing them against one another.

Directors must always seek to fulfil their role in the best interests of the company.

Punitive sanctions will be incurred by the directors/managers of both SARL and SA companies who, in bad faith, use the assets or credit of the company in a way they know is against the interests of the company, for personal, material or moral ends, or in favour of another corporate body in which they have an interest directly or indirectly.

As a general principle, the Italian Civil Code provides that the directors must comply with the duties provided by law and by the by-laws with the diligence required by the nature of the office held as well as in consideration of the specific competence of each director. The directors are jointly and severally liable towards the managed company for damages arising from the breach of their duties, except for those competences which have been delegated to the executive committee or which have been otherwise delegated to one or more directors.

The Italian Civil Code further provides that “in any event […] all directors are jointly liable if, despite being aware of facts prejudicial to the managed company, they have not done whatever is in their power to avoid the occurrence of such facts or, otherwise, to exclude or limit the prejudicial consequences of such facts.”

General duties binding each director are, for instance:

• Duty to act in order to pursue the company’s purpose.
• Duty to set out an organizational, administrative and accounting structure adequate given the nature and size of the company and functional to the timely detection of a business crisis. Directors also have the duty to act promptly to adopt one of the preventative restructuring frameworks for the overcoming of a business crisis, and to ensure the viability of the company.
• Duty of care. Directors must act with the diligence required by the nature of their office, taking into account their specific skills.
• Duty to inform the other directors. Executives must report to the board, at least once every six months, on the general management performance and on the most relevant operations.
• Duty to act advisedly. Directors may ask executives to report about the company’s management.
• Duty to monitor the executive directors. Directors may be held jointly liable if they fail to take the necessary measures to prevent damage to the company (if they are aware about facts that may adversely affect the company) . Non-executive directors must supervise and be informed about company’s business; on the basis of information received by executives, they asses the adequacy of the organizational structure of the company, they examine industrial, strategic and financial plans and they assess the general management performance.

• Duty to inform the other directors and statutory auditors, of any existing conflict of interest in a specific company transaction. If the director is a managing director they  must refrain from the transaction and defer the matter to the board which must make the decision about the transaction.

• Duty to keep the corporate books and to draft the annual financial statements and submit them for approval to the shareholders' meeting within 120 days from the financial year end (or within 180 days, in certain specific cases provided by the Italian Civil Code). Once the shareholders’ meeting approves the draft financial statements, the board members have to file them with the Companies' Register, within 30 days from the date of approval.

• Duty to call the shareholders’ meeting without delay in case of losses exceeding one third of the corporate capital.

• Duty to comply with all filing requirements with the Companies’ Register, for example, once the shareholders’ meeting appoints or removes a director, or approves the company's financial statements, the board members have to make the relevant filing with the Companies' Register within 30 days.

The extent of these duties and responsibilities and the standard of care required for each director depend on the director's office and specific expertise.

The key general duties of directors are as follows:

• Duty of care. Directors assume a fiduciary duty of care in managing the company. The fiduciary duty of care in managing includes (without limitation) making decisions regarding business operation with the care of a good manager; and complying with all laws applicable to the company’s operation.

Under the Japanese court precedents, whether the director breaches the fiduciary duty of care is determined based on whether the process of making the decision or the decision itself was extremely unreasonable or not (so-called "business judgement rule"). Even if a certain decision results in losses of the company, as long as the directors conduct sufficient examination and discussion before making the decision and the decision is reasonable, the directors generally would not be liable for the losses of the company. 

• Duty of loyalty. Directors are required to perform their duty so as to benefit the company and must not cause any disadvantage to the company by prioritising a benefit to themselves or to a third party.
• Duty of supervision. Directors are required to supervise the performance of duties of the representative director(s) or other directors. The directors are obliged to review and monitor any matters related to the company’s management even if those are not matters for which the director is responsible; provided, however, under the court precedents, in the case where the directors delegate/allocate responsibility of management among directors, a director generally shall not be responsible for the matters for which the director is not responsible unless the director is aware of any suspicion of breach of duties relating to such matters.

The key duties of a director under Kenyan law are borrowed from the English common law. Duties of directors have been codified in the Companies Act (Part IX, Division 3). They are as follows:

• Duty to act within Powers

Directors are required to act in accordance with the constitution of the company and only exercise powers for the purposes for which they are conferred. Directors should exercise the powers conferred upon them by law or by shareholders strictly for the benefit of the company in which they are a director and not for any other purposes.

• Duty to promote the success of the company

Directors must act in the way that they consider, in good faith, would be most likely to promote the success of the company for the benefit of its members as a whole, having regard (amongst other matters) to: (1) the long term consequences of decisions, (2) the interests of the company's employees, (3) the need to foster the company's business relationships with customers, suppliers and others, (4) the impact of the company's operations on the community and the environment, (5) the desire to maintain a reputation for high standards of business conduct, and (6) the need to act fairly between members.

• Duty to exercise independent judgment

A director may rely on other people (e.g. through proper delegation or by seeking independent professional advice) provided that it is reasonable to do so. A director should not limit their discretion, unless properly authorized to do so by the constitution of the company, or by acting in accordance with an agreement entered into by the company.

• Duty to exercise reasonable care, skill and diligence

A director must exercise the same care, skill and diligence that would be exercisable by a reasonably diligent person with (1) the general knowledge, skill and experience that may reasonably be expected of a person carrying out the functions performed by the director in relation to the company; and (2) the general knowledge, skill and experience that the director has.

• Duty to avoid conflicts of interest

A director must avoid situations in which they have or could have a direct or indirect interest that conflicts with, or may conflict with, the company's interests. This applies especially in matters relating to the exploitation of any property, information or opportunity.

• Duty not to accept benefits from third parties

A director is under a duty not to accept a benefit from a third party if the benefit is attributable to the fact that the person is a director of the company, or to any act or omission of the person as a director.

• Duty to declare interests in proposed or existing transactions or arrangements

A director must declare the nature and extent of their interest in a proposed or existing transaction or arrangement to the other directors. Such declaration must be made before the company enters into the transaction or arrangement concerned. This duty does not, however, apply if the director is not aware of the interest or the transaction or arrangement to which the interest relates. A director is however assumed to be aware of matters of which the director ought reasonably to be aware.

Directors have additional key duties under Kenyan Insolvency laws. These duties fall into three broad areas as follows:

• Avoiding misfeasance

A director may be examined in connection with misfeasance related to the money or property of a company, or a breach of their fiduciary duties discussed under the Companies Act. In addition, if within the twelve months preceding a liquidation, a director concealed or fraudulently removed property, concealed any debt or falsified or destroyed documents, the director will have committed an offence under the Insolvency Act.

• Protection of creditors

A director may be held personally liable for wrongful trading where they allow the company to continue incurring liabilities when they know, or ought to know, that there is no reasonable prospect of the company avoiding an insolvent liquidation. If there is no reasonable prospect of avoiding an insolvent liquidation, the directors have an obligation to manage the affairs of the company with a view to minimising the potential losses to creditors.

A director may also be held personally liable for fraudulent trading if they enter into transactions or carry on any business of the company with the intent to defraud creditors or for any other fraudulent purpose. A liquidator can seek a court declaration that anyone who was knowingly party to the fraudulent business make a contribution to the company's assets.

Further, a court may reverse (and render void) an arrangement where a company in financial difficulty gives preference (during the 24 months before insolvency) to a creditor of the company, a surety or guarantor of any of the company’s debts or other liabilities that puts them in a preferential position. This provision is meant to balance the interests of all creditors.

A director is also required to make sure that creditors are notified of insolvency related meetings or events so that they can take appropriate action to protect their interests. In this regard, a director must disclose accurate information to creditors to ensure that they are able to make informed decisions, especially regarding an arrangement such as a Company Voluntary Arrangement.

• Co-operation with insolvency practitioners

A director is required to cooperate with insolvency practitioners during an insolvency. A director should therefore provide information required by a liquidator, administrator, monitor, supervisor or other appointed insolvency practitioner. A director should also make themselves available to meet with such insolvency practitioners as reasonably required. 

Once an insolvency practitioner is appointed to manage the affairs of an insolvent company, directors are prohibited from performing or exercising management functions without the consent of the practitioner.  During this period, the directors are required to disclose and hand over the company’s property to such practitioner. It is an offence to dispose of any company property without the practitioner’s consent (unless a Court has approved such disposal).

The key general duties of the managers are to manage the affairs of the company and take any action they consider necessary or useful to realise its corporate purpose, as stated in the Articles, unless that action is reserved to the general meeting of shareholders by law (e.g. approval of the annual accounts). The Board is thus a company’s main decision making body, and is responsible for determining the guidelines for its management and business development.

The managers represent the company, and must exercise their duties with as much care, diligence and skill as would be displayed by a reasonable person in the same circumstances. Greater expertise, such as would be displayed by a reasonably competent member of the same profession may be expected from a manager who is a member of a specific profession, e.g. a lawyer or accountant. Although Luxembourg law, unlike common law jurisdictions, contains no such concept as the "fiduciary duty" of managers, the managers must also act with loyalty, honesty and in good faith, for the company's exclusive benefit. Hence they must participate in Board meetings and manage the company actively.

The company must act for its own benefit and in its own corporate interest (intérêt social). In that context, managers are responsible for determining whether a particular action falls within the boundaries of the corporate interest, a decision which is made on a case by case basis and in the light of all prevailing circumstances.

The key duties of a director under Mauritius law are to act, in good faith and in best interests of company and to:

• Exercise their powers in accordance with the Companies Act and with the limits and subject to the conditions and restrictions established by the company’s constitution.
• Obtain the authorization of a meeting of shareholders before doing any act or entering into any transaction for which the authorization or consent of a meeting of shareholders is required.
• Exercise their powers honestly in good faith in the best interests of the company and for the respective purposes for which such powers are explicitly or impliedly conferred.
• Exercise care, diligence and skill.
• Not agree to the company incurring any obligation, unless the director believes at that time on reasonable grounds that the company shall be able to perform the obligation when it is required to do so.
• Account to the company for any monetary gain, or the value of any other gain or advantage, obtained by them in connection with the exercise of their powers, or by reason of their position as directors of the company, except remuneration, pensions provisions and compensation for loss of office in respect of their directorships of any company.
• Not make use of or disclose any confidential information received by them on behalf of the company as directors otherwise than as permitted.
• Not compete with the company or become a director or officer of a competing company, unless this is approved by the company.
• Disclose any interest where directors are interested in a transaction to which the company is a party.
• Not use any assets of the company for any illegal purpose and not do, or knowingly allow to be done, anything by which the company's assets may be damaged or lost, otherwise than in the ordinary course of carrying on its business.
• Transfer forthwith to the company all cash or assets acquired on its behalf, whether before or after its incorporation, or as the result of employing its cash or assets, and until such transfer is effected to hold such cash or assets on behalf of the company and to use it only for the purposes of the company.
• Attend meetings of the directors of the company with reasonable regularity, unless prevented from so doing by illness or other reasonable excuse.
• At all times act in a manner which is not, oppressive, unfairly discriminatory, or unfairly prejudicial to shareholders.

Directors/Managers are obliged to confirm:

• That the shareholders/partners have made their contributions to the entity.
• That the legal and statutory requirements established with respect to the dividends paid to the shareholders/partners have been complied with.
• The existence and maintenance of the accounting, control, registry, filing or information systems provided by law.
• That the resolutions of the shareholders/partners' meetings have been exactly complied with.

The powers and duties of the general manager(s) are primarily limited by the company's interests and corporate purpose. As the legal representative of the company, the general manager is responsible for its management. Therefore, the general manager will negotiate contracts, look for potential merger targets and determine the major commercial strategies of the company, subject to the verification and validation of the board. 

The company will however be committed to third parties even by the acts of the general manager that do not fall within the corporate purpose, unless the bad faith of third parties is proven. Moreover, the powers of the general manager may also be conventionally specified in the articles of association. Exceeding these powers does not, however, entitle third parties to bring a claim.

In general terms, directors are responsible for the management activities of the company, binding the company, pursuant to the terms established for each type of company, and representing the company in or out of court. Directors must act in compliance with the law and the company´s articles of association and are subordinated to the decisions of the shareholders and intervention of the supervisory body insofar as the law or the articles of association so require.

Directors must, in particular:

• act with care, showing adequate availability, technical competence, knowledge of the business of the company and act with the diligence of a judicious and orderly manager;
• observe the duties of loyalty in the interest of the company, taking into account the interests of the shareholders and weighing the interests of other subjects relevant to the sustainability of the company, such as the company´s employees and creditors; and
• exercise their office as fiduciary director of all shareholders, whether controlling, minority or holders of preferential shares, whose rights must be treated equally.

Furthermore, under the New CCom, the following are fiduciary duties of directors:

• to keep confidential information that has not yet been confirmed and that may, when disclosed to the market, have a significant influence on the listing of the company´s securities, and ensuring that its subordinates do not disclose such information;
• to disclose, on the day immediately following the relevant matter, any resolution of the General Assembly or of the management bodies relating to a matter which has occurred in the company’s business that may influence, in a considerable way, decisions of investors in the securities market;
• not to use information obtained in the exercise of their office to obtain, for them or for third parties, an advantage through the sale and purchase of securities (prohibition of insider trading);
• to establish an ethical relationship of the minority shareholders in political terms, namely, the right to vote, the right of representation in the corporate bodies and those relating to property rights;
• to ensure the protection of the interests of the shareholders, employees and other participants of the company, within the powers conferred on them by law or the articles of association, in order to carry out the corporate and social purposes of the company;
• to increase investors´ confidence in order to attract a greater volume of capital in the long term; and
• to optimize the use of capital, reducing the company’s costs, through more stable financing purposes.

Director duties are determined mainly under common law.  Specific duties are also provided for under the Companies Act and under the company’s articles of association.  Under common law, the main duties of directors may be grouped in two groupings: the duty of care, skill and diligence; and fiduciary duties. 

Duty of care, skill and diligence

All directors of a company are required by law to exercise the necessary care, skill and diligence in the performance of their duties.  This is confirmed by the NamCode as well.  The duty to act with care, skill and diligence is owed to the company and not the shareholders.  The extent of a director’s duty of care and skill depends to a large degree on the nature of the company’s business and on any particular obligations assigned to the relevant director and other officers. 

This duty entails that, in discharging their duties, a director must at all times act honestly and in good faith.  No director should be entitled to hide behind culpable ignorance or failure to understand a company’s business.  A director, in the performance of their duties, does not need to exhibit a greater degree of skill than may reasonably be expected from a person of their knowledge and experience.

As a result, directors are not required to have special business acumen or expertise, or even experience in the company’s business.  However, the skill that the director must exercise will depend on whether they were appointed for a particular skill or expertise in a given field; directors are expected to exercise the care and skills which can reasonably be expected of a person with that director’s knowledge and experience.

Fiduciary duties

Directors stand in a fiduciary position towards the company on whose board they serve.  A director’s fiduciary duties – as with the duty of care, skill and diligence – is owed firstly to the company and not the shareholders or any individual shareholder.  Various duties of directors flow from this fiduciary relationship between directors and the company.  Some of the fiduciary duties of directors have also been codified in the Companies Act.  The fiduciary duties of directors are grouped under the following categories:

• the duty to act bona fide in the best interest of the company
• the duty to act within their powers and the powers of the company
• the duty to exercise their powers for the purpose for which they were conferred
• the duty to act with unfettered discretion and independent judgment, and
• the duty to avoid conflicts of interest.

The basic principle under Dutch law is that the board is collectively responsible for the day-to-day management of the company. Its duties also include making plans for the future and determining the strategy and policies of the company. The board has a central role with respect to preparing, determining and executing the policies of the company.

The key duties of a director are set out in the DCC:

• The task of the board is to serve the corporate interest of the company, meaning the interests of the company and the enterprises affiliated with it, i.e. the interests of all stakeholders of the company. When the board acts contrary to the corporate interest, the relevant director(s) can be held liable.
• The company and the persons who by virtue of law and the articles of associations are concerned with its organisation must conduct themselves in relation to each other in accordance with the requirements of reasonableness and fairness. The board should act reasonably and fairly in relation to other persons who are concerned with the company and its organisation. The company must furthermore treat its shareholders equally. A resolution of the board may be voidable if it is contrary to the principles of reasonableness and fairness.
• The duty of each director towards the company is to properly perform the individual tasks allocated to them. When a director breaches their duty of proper performance, they may be held personally liable.

The core corporate duties applying to company directors are found in the Act. Directors also owe duties at common law and in equity in parallel to these statutory duties. A director occupies a fiduciary position in relation to their company and owes the company certain fiduciary obligations in equity.

These duties apply to all directors of a company, whether active or not. There is no protection under New Zealand law for “sleeping" or "silent" directors who in fact have little or no knowledge of the affairs of a company.

It is a criminal offence if a director commits a serious breach of these duties, and they can be liable to imprisonment for a term not exceeding five years or to a fine not exceeding NZD200,000. A serious breach would be where the director exercises powers or performs duties as a director in bad faith while knowing the conduct is not in the best interests of the company and knowing that the conduct will cause serious loss to the company.

Set out below is a brief description of each duty.

Duty to act in good faith and in the best interests of the company

A fundamental directors' duty under New Zealand law is the duty to act in good faith and in what the director believes to be in the best interests of the company. This is a subjective test and requires directors to act honestly, exercise powers in the interests of the company, and avoid conflicts of interest. There is growing appreciation, both in practice and established in case law, that a company's best interest includes more than its financial bottom line, and includes environmental, social and governance concerns. An amendment has also been made to the Act in August 2023 confirming that directors may consider matters other than the maximisation of profits (for example, environmental, social, and governance matters).

Where the company is a wholly owned subsidiary, and where expressly permitted by its constitution, a director may act in accordance with what they believe to be in the best interests of the company’s holding company, even though it may not be in the interests of the company. This does not excuse the directors from acting in good faith; it merely allows different interests to be taken into account.

Further, where the company is or may be approaching insolvency, a director's duty of good faith extends to creditors of a company, given that it is primarily creditors' funds which are at stake in such circumstances. This topic was most recently considered and settled by the New Zealand Supreme Court in its decision in Yan and others v Mainzeal Property and Construction Limited (in liquidation) and another [2023] NZSC 113 (Mainzeal).

Powers to be exercised for a proper purpose

Directors must exercise their powers for a proper purpose. In assessing what a "proper purpose" is, the purpose motivating the exercise of power must be consistent with the purpose for which the power was granted, assessed objectively.

To date, the courts have confined the application of this duty to limited situations where a director takes certain steps (such as issuing shares) to prevent a take-over or change of control in a company.

Directors to comply with the Act and the constitution

A director must not act, or agree to the company acting, in a way that contravenes the Act or its constitution (in the case of the latter, if the company has one). A court can make an order restraining a director that proposes to engage in conduct that would contravene their constitution. On the application of a shareholder, the court can also order a director to take action that is required by the directors under their constitution or the Act. A court may also appoint a liquidator if it is satisfied that the company or one or more of its directors or shareholders, has in a persistent or serious way failed to comply with their duties under the Act.

Reckless trading

A director must not cause, allow or agree to the carrying on of the business in a manner which is likely to create a substantial risk of serious loss to creditors. There can only be a substantial risk of serious loss where the company is already in some financial difficulty, or where the action proposed would effectively expose the company's solvency. In the case of looming insolvency, it is the creditors' funds at risk, rather than shareholders' equity. Directors need to be extremely cautious before embarking on a course of continued trading as a result. If operating the business as usual is likely to cause significant risk of serious loss to creditors, trading in that manner in the face of insolvency will breach this duty. Mainzeal has confirmed that compensation for a breach of this duty should be assessed on a net deficiency basis. This means directors may be liable for the amount by which a company's position worsened from the time the company should have stopped trading and the time it went into liquidation.

Duty in relation to obligations

Equally, a director must not agree to a company incurring an obligation unless the director believes at that time on reasonable grounds that a company will be able to perform the obligation.

In cases of near insolvency, directors need to carefully monitor the company incurring new obligations. This provision requires consideration of the specific obligations being taken on by the company, and the reasonableness of the director's belief that the company would be able to meet that obligation. Mainzeal has confirmed that compensation for a breach of this duty should be calculated on a new debt basis (i.e. the amount of new debts incurred after the point where a company should not have incurred any new obligations).

Carrying on business fraudulently or dishonestly incurring debt

A director cannot knowingly be a party to a company carrying on business that has an intention to defraud creditors of the company or any other person or for a fraudulent purpose.

Every director of a company commits an offence if:

• the company incurs a debt
• the company is insolvent at the time that it incurs the debt (or other debts that include the debt) or becomes insolvent by incurring the debt (or other debts that include the debt)
• the director knows, at the time when the company incurs the debt, that the company is insolvent or will become insolvent as a result of incurring the debt or other debts that include the debt, and
• the director's failure to prevent the company incurring the debt is dishonest.

Any director who breaches this duty is liable to imprisonment for a term not exceeding five years or to a fine not exceeding NZD200,000. 

Duty to exercise reasonable care and skill

A director of a company, when exercising their powers or performing duties as a director, must exercise the care, diligence and skill that a reasonable director would exercise in the same circumstances, taking into account (but without limitation) the:

• nature of the company;
• nature of the decision; and
• position of the director and the nature of the responsibilities undertaken by them.

The standard of care and skill required is not that of a person of the same knowledge and experience as the director, but the objective standard of a reasonable director. However, greater care and skill may be expected of directors in certain circumstances, for instance for directors of some types of complex companies (such as issuers of financial products) or for decisions that require greater time and effort (such as approval of financial statements). So, while at face value the notion of a reasonable director does not draw distinction between executive and non-executive directors, the greater the responsibility undertaken by a director, the higher the standard they will be held to. In Mainzeal the New Zealand Supreme Court focused on the need for directors to act reasonably, as well as honestly and diligently. The Mainzeal directors relied on unenforceable assurances of support from group companies, which the New Zealand Supreme Court found was unreasonable and ultimately a factor in the directors being found liable in this case.

Duty relating to use of company information

The general rule is that a director of a company who has information in their capacity as a director or employee of the company, being information that would not otherwise be available to them, must not disclose that information to any person, or make use of the information except for the purposes of the company.

In addition, directors have similar duties under common law, for example not to misuse the company's property, and to keep company information confidential and only use it for the benefit of the company.

A director stands in a fiduciary relationship towards a company and must observe the following duties:

• Good faith: Directors must observe good faith in any transaction in relation to the company and discharge their duties honestly.
• Best interest of the company: Directors must act in the way that they believe to be the best interest of the company, so as to further its business and promote its objectives. In doing so, the directors must have regard to the impact of the company's operations on the environment in the community it operates, the interest of the company’s employees and the interest of its shareholders. Directors are responsible for monitoring the risk management framework in place in the Company, to ensure business continuity.
• Care and skill: Each director must exercise a degree of care, diligence and skill which a reasonably prudent director would exercise in comparable circumstances. Directors must meet the minimum standard of skill and care expected of someone in their position, and they must also bring to bear their particular skills and experience. Therefore, the more qualified  or experienced a director is, the greater the statutory standard required of them.
• No collateral purpose: Directors must exercise their power for the specific purpose it was given and not for any collateral purpose. They must not restrict their discretion to vote in any particular way.
• No conflict of interest: Directors must not put themselves in a position where there is, or could be, a conflict between their personal interests and their duty the company.
• No secret profit: Directors must not make any secret profit or achieve any unnecessary benefit and must declare the nature and extent any interest in proposed transactions or arrangements with the company before the secret profits are made.
• Misuse of corporate information: Directors must not to misuse the company's information.
• Gifts: Directors must not accept bribes, gifts or commissions from any person in respect of any transaction involving their  company in order to introduce their company to deal with such a person.

There are three key duties of the board of directors:  

• Management of the company. The board of directors must ensure the proper organisation of the business of the company. The board of directors must draw up plans and budgets for the company’s business. The board of directors may also lay down guidelines for the business. The board of directors must keep itself informed of the company’s financial position and is obliged to ensure that its activities, accounts, and capital management are subject to adequate control.
• Supervisory responsibility. The board of directors must supervise the day-to-day management and the company’s business in general.
• Duty to act in the event of capital deficiency of insolvency. If the equity is presumed to be less than adequate in terms of the risk and scope of the company’s business, the board of directors shall forthwith deal with the matter. The board of directors must within a reasonable time call a general meeting and report to it on the company’s financial position and propose remedying measures. If the board of directors does not find measures to ensure adequate equity, it must propose the dissolution of the company.

Directors must perform their role with the diligence of a prudent businessperson and a loyal representative.

The board of directors should provide shareholders and stakeholders with sufficient, reliable and timely information, as determined by law, regarding the legal, economic and financial situation of the company.

The key duties of management board members are set out in the Polish Commercial Companies Code, however, they are also spread throughout the entire Polish legal system.

These are duties to:

• Carry out the company's affairs and represent the company in relation to third parties. This means that any activity that is not attributed to another body of the company belongs to the management board and is the responsibility of its members.
• Apply diligence resulting from the professional nature of management board members’ activities. Management board members should fulfil their duties with diligence resulting from the professional nature of their activities. This includes, in particular, the knowledge of organisational and financial processes, but also of the law in force including the legal consequences arising from statutory law with regard to business activity, as well as human resources management.
• Fulfil yearly reporting obligations. This covers preparing and signing (with qualified electronic signatures) the company’s yearly financial statements and management board’s reports on the company’s activities and submitting them to the National Court Register within the prescribed time limits each year.
• Convene ordinary and extraordinary shareholders' meetings.  In general, an ordinary meeting of shareholders should be held within six months of the end of each financial year. If the balance sheet drawn up by the management board shows a loss exceeding the sum of supplementary and reserve capitals and a half of the share capital, the management board members are obliged to immediately convene the shareholders' meeting in order to adopt a resolution concerning the company's further existence. Furthermore, a shareholders’ meeting should be convened at the request of a shareholder(s) representing at least one tenth of the share capital. Nevertheless, the shareholders’ meeting should be convened in all instances where the management board deems it appropriate.
• Keep a share register. The management board members are jointly obliged to prepare and maintain such a register. The members are also obliged to update this book if any changes appear.
• Refrain from engaging in competitive business or participate in competitive entities as a partner in a civil law partnership or a partnership, or as a member of the authorities of a company, or any other competitive legal entity. However, the shareholders may give a relevant consent which allows a board member to carry out the competitive activities.
• Avoid conflicts of interest. In the event of a conflict of interests between the company and a management board member, their spouse, relatives and second degree next of kin and persons with whom the management board member has a personal relationship, the member should disclose the conflict of interests and refrain from participating in the settlement of such issues and may request that this fact be recorded in the minutes of the management board meeting.

In addition, management board members have duties under various legal acts of statutory law, for example not to misuse the company's property and to keep company information confidential and only use it for the benefit of the company.

The key duties of a director are set out in the Portuguese Companies Code, pursuant to which the director:

• Must observe a duty of care towards the company, demonstrate capability, technical competence and an understanding of the company's business considered appropriate for the role, and to execute its tasks with the diligence of a careful and earnest manager.
• Must observe a duty of loyalty towards the interests of the company, serving the long term collective interests of the shareholders and taking into consideration the interests of other stakeholders such as employees, clients and creditors by ensuring the sustainability of the company. As a specific realization of this duty, the directors must not pursue or develop, directly or indirectly, other activities in direct competition with the company, unless duly authorized by the general meeting of shareholders.
• Must carry out any acts deemed necessary or appropriate to achieve the corporate purpose in line with the resolutions adopted by the shareholders, the bylaws and the applicable law.
• Are responsible for drafting merger and spin-off plans, in addition to other documents required or appropriate for the full legal and economic transparency of the transaction, as well as preparing a report in case of change of the company´s legal form (i.e. a change to a different type of company).
• Are responsible for performing and executing all managing acts not specifically reserved by law or bylaws to the general meeting of shareholders.
• Are responsible for, following a shareholders resolution (except an unlawful resolution or resolutions that are not compliant with the company´s by-laws), taking all necessary measures to execute such resolution, as promptly as possible (namely resolutions making any amendments to the company’s bylaws).

In addition, if agreed by the shareholders and set out in the company’s bylaws, the directors must also decide on and implement:

• The acquisition, disposal and encumbrance of real estate of the company.
• The disposal, encumbrance and lease of the business establishment of the company.
• The subscription or acquisition of other companies’ shares or the disposal and/or encumbrance of these shares.
• The establishment of subsidiaries, agencies, branches or other local forms of representation of the company.

In general, the directors are bound to manage a company in a professional and diligent way, which includes compliance with all legal, statutory and contractual requirements.

The duties of a director in a LLC include:

• General company obligations, such as the preparation and filing of accounts.
• Acting honestly and in the LLC’s best interests.
• Acting in manner which is compatible with the LLC’s constitution and objectives.
• Exercising a degree of care in the discharge of management responsibilities.
• Acting within the powers granted.
• Disclosure of any conflicts of interest.
• Compliance with statutory restrictions, including relating to loan arrangements.
• Compliance with statutory requirements in the case of insolvency.

Directors' rights, duties and liabilities are governed by the civil law provisions regarding the mandate agreement  and by the special rules set out under the Company Law.

Directors' rights (e.g. the right to manage the company and the right to represent the company towards third parties) set out by the Company Law are designed in a quite broad manner in order to allow a flexible management of the company.

According to the Company Law, the directors represent the company towards third parties and may undertake all actions required to carry out the company's business. Directors are empowered to make any necessary decisions in relation to the company’s activity, within the limits set out by the Company Law, shareholders' resolutions and the AoA of the company.

Directors have several duties related to the internal management of the company, such as the duty to convene and attend the shareholders' meetings, the duty to draft the annual report accompanying the annual financial statements of the company and business plan, the duty to keep the company's registries.

• Convening and attending the shareholders' meeting. The directors are obliged to convene the GMS at least once a year or as many times as necessary.
• The annual report. The annual report should comprise an accurate presentation of the business performance and financial position of the company, together with a summary of the main risks and uncertainties faced by the company. In addition, explanations and details on the figures within the annual financial statements should also be included.
• Keeping the company's registries (which includes the shareholders' register). The obligation of the directors to maintain and update the shareholders' register is compulsory. Such shareholders' register should reflect:
  • The shareholding history of the company, including the identification details of the former and existing shareholders and their participations in the share capital.
  • All the transfers of shares that have occurred in the company, if the case.
  • Any other changes that have occurred in relation to the shares of the company (e.g. any pledges over the shares, share capital increases, etc).

The duties of a director include:

• General company obligations, such as the preparation and filing of accounts.
• Acting in compliance with applicable law and the provisions of the articles of association.
• Acting in a way which is compatible with the LLC's objectives.
• Exercising a degree of care in the discharge of management responsibilities.
• Acting within the powers granted.
• Not acting against the interests of the company for personal benefit.

A director contributes to the daily running of the company and performs all management acts in the interest of the company.

A director also represents the company with regard to third parties.

The Act provides that a director shall at all times act honestly and use reasonable diligence in the discharge of the duties of their office.

The key duties of a director are set out in the Act and under common law.  These are duties to:

• Act in good faith in the best interest of the company. Directors must act in the way that they consider, in good faith, would be most likely to promote the success of the company for the benefit of its members as a whole, having regard (amongst other matters) to:
  • The long term consequences of decisions.
  • The interests of the company's employees.
  • The need to foster the company's business relationships with customers, suppliers and others.
  • The impact of the company's operations on the community and the environment.
  • The desire to maintain a reputation for high standards of business conduct
  • The need to act fairly between members.

There is no hierarchy to these factors and, where they conflict, a director will need to use their business judgement in weighing the conflicts against one another.

Companies which are "large" for accounting purposes are required to include a statement in their annual financial report describing how, during the relevant financial year, the directors have had regard to these factors when performing their duty to promote the success of the company.

• Act with reasonable care, skill and diligence. Directors must meet the minimum standard of skill and care expected of someone in their position and they must also bring to bear their particular skills and experience – therefore, the more qualified or experienced a director is, the greater the subjective standard of duty of care, skill and diligence is imposed on the director.
• Exercise independent judgement. However, a director may rely on other people (e.g. through proper delegation or by seeking professional advice) provided they judge that it is reasonable to do so and it does not fetter the director’s discretion pursuant to an agreement entered into by the company or is done in a way that is authorised by the company's constitution.
• Act within the company's constitution and exercise their powers for the purposes for which they were given and not for any collateral purpose.
• Act honestly and avoid conflicts of interest. Directors must not put themselves in a position where there is, or could be, a conflict between their personal interests or their duties to another person and the interests of the company (for example, where they are a director or employee of another company or where they may be in a position to take advantage of any property, information or opportunity they became aware of as a director).  This duty is not breached if the situation cannot reasonably be regarded as giving rise to a conflict of interest or if the situation has been pre-authorised by the board, by shareholders or in the company's constitution.
• Not accept benefits from third parties, without prior shareholder approval. This duty is not breached if acceptance of such benefits cannot reasonably be regarded as giving rise to a conflict of interest.  This allows for reasonable levels of corporate hospitality from third parties.
• Declare interests in proposed transactions or arrangements with the company. Directors must disclose the nature and extent of their personal interests in a proposed transaction or arrangement with the company before it is entered into.  Directors must also declare the nature and extent of their interest in a transaction or arrangement that has already been entered into by the company as soon as reasonably practicable.
• Not to make improper use of information obtained by virtue of office to gain advantage personally or to cause detriment to the company and not to make improper use of unpublished price-sensitive information to gain personal benefit.
• Maintain duty of confidentiality. A director must not disclose information of a confidential nature concerning the company (which could include information about its business, future plans, research and development and other commercially sensitive information) to anyone else, unless they have been authorised by the company to do so.  For example, where a director is appointed by a shareholder they must not, without the authority of the company, disclose to that shareholder any confidential information relating to the company which has been gained by them as a director.  In this situation, the board should agree in advance what categories of information a director can pass to a shareholder, for example, through a shareholders' agreement.

A director is in charge of the company’s day-to-day business.

The key duties of a director are, for example:

• To ensure due administration of the company's prescribed records and accounts, to keep a list of shareholders and to inform shareholders of the company’s affairs.
• To submit for the general meeting’s approval financial statements and a proposal for the distribution of profit or payment of losses.
• To exercise powers with professional care and in accordance with the interests of the company and all its shareholders. In particular:
  • Directors must obtain and take into account in their decision-making all available information relating to the subject of their decision.
  • Directors must maintain confidentiality about confidential information and facts, the disclosure of which to third parties could cause damage to the company or endanger its interests or the interests of its shareholders.
  • While exercising their powers, directors must not give priority to their own interests, the interests of only certain shareholders or the interests of third parties over the company’s interests.

A director, alternate director, prescribed officer and member of a committee or board must:

• Perform all powers and functions:
  • in good faith and for a proper purpose, which entails acting within the company’s capacity at all times and using powers only for the purpose which they have been assigned
  • in the best interests of the company whilst considering the interests of the stakeholders of the company and
  • with the degree of care, skill and diligence that may reasonably be expected of a person carrying out the same functions in relation to the company as those carried out by that director and having the general knowledge, skill and experience of that director.
• Exercise an independent and unfettered discretion and judgement, and in particular where the opinion of an outside expert is relied upon, such director must still apply their mind and exercise their own independent judgment.
• Avoid any conflicts of interest.

The main duties of directors are the following:

• A duty of care (deber de diligencia). Directors must perform their duties with the diligence of an "orderly businessman" (ordenado empresario) and comply with the various duties imposed by applicable law, by company's bylaws and by other internal rules of conduct of the company with this level of diligence. The duty of care includes:
  • the duty to exercise the office effectively
  • the duty of vigilance or supervision
  • the duty to be informed and
  • the duty to subordinate their particular interest to the “interest of the enterprise” (interés de la empresa).

For strategic and business decisions, which are subject to business judgement, diligent conduct can be reviewed by applying the “business judgement rule” (regla de la discrecionalidad empresarial). Under this rule, the diligence standard is met when the director has acted in good faith, without self-interest, with sufficient information and in accordance with an appropriate decision-making procedure.

• A duty of loyalty (deber de lealtad). This duty requires the directors to exercise their functions at all times in the interest of the company. This duty of loyalty obliges the director to act in good faith and be guided by what is most favourable to the company. It includes, among others, not to exercise their powers for purposes other than those provided, to keep the confidentiality of the received information or to refrain from participating in decisions in which the director has a direct or indirect conflict of interest.

The board of directors is responsible for the organisation of the company and management of the company's affairs. The management of the company's affairs includes all matters where the shareholders' meeting does not have the exclusive right to make decisions.

The key general duties consist of:

• The duty to ensure the organisation of the company and management of the company's affairs. The board of directors shall ensure that the company's organisation is structured in such a manner that the company's accounts, asset management, and finances in general are monitored in a satisfactory way.
• The duty to regularly assess the company's financial position. The board of directors shall regularly assess the company's financial position and, if the company is the parent of a group, the group's financial position. The board of directors is also responsible for ensuring that the company's taxes and fees to the relevant authorities are paid. A failure by the company to pay taxes may entail personal liability for the board of directors.
• The duty to act in the event of capital deficiency or insolvency. The board of directors shall immediately prepare and cause the company's auditor to examine a balance sheet for liquidation purposes where (Sw. kontrollbalansräkning):
  • there is reason to assume that the company's equity is less than half of its registered share capital; or
  • in conjunction with execution pursuant to the enforcement code (Sw. utmätning) it has been found that the company lacks attachable (Sw. utmätningsbara) assets for the full payment of the relevant claim.

Where the balance sheet for liquidation purposes shows that the company's equity is less than half of its registered share capital, the board of directors shall, as soon as possible, undertake a number of actions, including convening a shareholders' meeting which shall consider whether the company shall enter into liquidation (initial meeting for liquidation purposes). The balance sheet for liquidation purposes and an auditor's report on such balance sheet shall be presented at the shareholders' meeting. If the general meeting does not resolve that the company shall go into liquidation, the general meeting shall, within eight months of the initial meeting for liquidation purposes, reconsider the issue again (second meeting for liquidation purposes). However, if the company undergoes an in-court company reorganisation proceeding (Sw. företagsrekonstruktion), the second meeting for liquidation purposes does not have to be held earlier than two months after the reorganisation procedure is completed. Where the board members have failed to act in this regard, the members of the board of directors shall be jointly and severally liable for such obligations as are incurred by the company during the period of such failure to act.

• The duty to act in good faith to promote the success of the company for the benefit of its shareholders as a whole.  When discharging this duty, directors must have regard to a number of factors including (amongst other things) the long term consequences of their decisions; the interests of the company's employees; the need to foster the company's business relationships with customers, suppliers and others; the impact of the company's operations on the community and the environment; and the desire to maintain a reputation for high standards of business conduct.

The key duties of a director are set out in the CA.  These are duties to:

• Act in good faith and in the best interest of the company. Directors are required to act in the way that they consider, in good faith, would be most likely to promote the success of the company for the benefit of its members as a whole. In doing so, directors should have regard (amongst other matters) to:
  • The likely consequences of any decision in the long term.
  • The interests of the company’s employees.
  • The need to foster the company’s business relationships with suppliers, customers and others.
  • The impact on the company’s operations on the community and the environment.
  • The desirability of the company maintaining a reputation for high standards of business conduct.
  • The need to act fairly as between shareholders of the company.

Where it is established the company is to be sold to a third party (or its value realised for the benefit of the shareholders generally in some other way) for example, the directors should seek to maximise shareholder value.

For normal commercial companies, success for these purposes is generally interpreted as a long-term increase in value and what constitutes such success is a matter for the directors' good faith judgment.

• Act within the powers conferred by the company’s memorandum and articles of association. Directors must act in accordance with the company’s constitution (including the articles of association) and only exercise powers for the purposes for which they are conferred (e.g. it may be that a director is given specific authority for a specific set of circumstances which doesn’t align with the articles of association).
• Exercise care, skill and diligence. Directors must exercise reasonable care, skill and diligence in the exercise of their functions. This means they must exercise the degree of care, skill and diligence that would be exercised by a reasonably diligent person with both:
  • the general knowledge, skill and experience that may reasonably be expected of a person carrying out the functions carried out by the relevant director in relation to the company (the objective element) and
  • the special knowledge, skill and experience that the director actually has (the subjective element).

This dual test means that all directors are subject to an objective minimum standard and a more demanding, subjective test based on the director's own skills and experience (for example, accounting or legal knowledge if the director has an accountancy or legal qualification).

Non-executive directors can look to others to perform particular tasks, but they retain residual responsibilities for supervision and control which cannot be delegated and have a collective responsibility to manage the company. It will therefore be essential for all non-executive directors to ensure that they are properly informed about the company's affairs, both when they take up their appointment, and for the duration of their appointment.

Although non-executive directors may to a significant degree rely on information and explanations provided by the executive directors and senior management, they should not do so blindly and without question. For example, non-executive directors are expected to satisfy themselves, by requesting appropriate information and explanation from management, that actions proposed by the executive directors will promote the success of the company.

• Not make a secret profit.
• Have regard to interest of employees. Directors have a duty to have regard to the interests of employees, to exercise powers for proper purpose. This duty is enforceable in the same was as any other fiduciary duty owed to a company by its directors.
• Avoid conflicts of interest.  Directors are under a positive obligation to avoid any situations in which they have (or could have) a direct or indirect interest, which either conflicts, or could potentially conflict, with the interests of the company. In addition, directors have a duty to declare the nature and extent of any direct or indirect interests in a proposed transaction or arrangement with the company to the board and such conflicts or interests will need to be authorised by shareholders or the board.
• Make disclosure. Directors have a duty to give notice to the company:
  • Of such matters relating to themselves as may be necessary for the purposes of directors shareholding, salaries, pension, compensations for loss of office etc. and particulars of loans made to officers.
  • Where the director or any connected person is in any way, whether directly or indirectly, interested in a contract or proposed contract with the company to declare the nature of that interest at a meeting of the directors of the company.

In the case of a proposed contract, the declaration shall be at the meeting of the directors at which the question of entering into the contract is first taken into consideration, or if the director was not at the date of that meeting interested in the proposed contract, at the next meeting of the directors held after the director became interested. In the case where the director becomes interested in a contract after it is made, the said declaration shall be made at the first meeting of the directors held after the director becomes so interested.

Directors also have a duty:

- To make disclosures of beneficial owners with the Companies Registry and keep a register of beneficial owners with the relevant information relating to such owners.  Failure by a company to comply with these disclosure requirements is an offence which on conviction attracts a fine of not less than Tanzania Shillings five million (TZS 5,000,000) payable by each officer of the company in default.

- Of non-disclosure of beneficial owners to the public. Directors have a duty to make sure that the company does not disclose information about its beneficial owners. The beneficial owner information can only be disclosed for purposes of complying with the Companies (Beneficial Ownership) Regulations 2021, for the purposes of communicating with the beneficial owners or in compliance with a Court Order. Disclosure of beneficial ownership information to the public is an offence which on conviction attracts a fine of not less than Tanzania Shillings five million (TZS 5,000,000) payable by each officer of the company in default.

The law enables a manager of a limited liability company to carry out all the acts which fall within the object of the company and which are in the interest of the company. The manager is able to exercise all the powers granted to them either in the bylaws or in the minute of an ordinary general meeting of appointment, and must act in the best interests of the company.

It should be noted that there are no specific duties of the manager of a limited liability company in corporate law, except for the general duty of professional secrecy and confidentiality.

Directors have the following statutory duties:

• To act in a manner that promotes the success of the business of the company.
• To exercise a degree of skill and care as a reasonable person looking after their own business would.
• To act in good faith in the interests of the company as a whole, which duty includes fair treatment of all shareholders, avoiding conflicts of interest, declaring any conflicts of interest, not making personal profits at the company’s expense, not accepting compromising benefits from third parties, and ensuring statutory compliance.

Common law duties such as the duty to retain discretion remain enforceable despite not being codified.

Onshore UAE

The duties of a director in an LLC include:

• General company obligations, such as the preparation and filing of accounts.
• Acting in a way which is compatible with the LLC's objectives.
• Exercising a degree of care in the discharge of management responsibilities.
• Acting within the powers granted.
• Disclosing any conflicts of interest.
• Complying with the statutory restrictions relating to loan arrangements.

Dubai International Financial Centre

The key duties of a director are set out in the DIFC Companies Law. These are duties to:

• Promote the success of the company. Directors must act in the way that they consider, in good faith, would be most likely to promote the success of the company for the benefit of its members as a whole, having regard (amongst other matters) to: (1) the long term consequences of decisions; (2) the interests of the company's employees; (3) the need to foster the company's business relationships with customers, suppliers and others; (4) the impact of the company's operations on the community and the environment; (5) the desire to maintain a reputation for high standards of business conduct; and (6) the need to act fairly between shareholders.

There is no hierarchy to these factors and, where they conflict, a director will need to use their business judgement in weighing them against one another.

• Act with reasonable care, skill and diligence. Directors must meet the minimum standard of still and care expected of someone in their position and they must also bring to bear their particular skills and experience – therefore, the more qualified  or experienced a director is, the greater the statutory standard required of them.
• Exercise independent judgement. However, a director may rely on other people (e.g. through proper delegation or by seeking advice) provided they judge that it is reasonable to do so. A director may not usually limit their discretion, however in certain circumstances they can do so by acting in accordance with an agreement entered into by the company or in a way authorised by the company's articles of association.
• Act within the company's articles of association and exercise their powers for the purposes for which they were given and not for any collateral purpose. 
• Avoid conflicts of interest. Directors must not put themselves in a position where there is, or could be, a conflict between their personal interests or their duties to another person and the interests of the company (for example, where they are a director or employee of another company or where they may be in a position to take advantage of any property, information or opportunity they became aware of as a director). This duty is not breached if the situation cannot reasonably be regarded as giving rise to a conflict of interest or if the situation has been pre-authorised by the board  (provided conflicted directors take no part in this decision) or by shareholders or in the company's articles of association.
• Not accept benefits from third parties, without prior shareholder approval. This duty is not breached if acceptance of such benefits cannot reasonably be regarded as giving rise to a conflict of interest. 
• Declare interests in proposed transactions or arrangements with the company. Directors must disclose the nature and extent of their personal interests in a proposed transaction or arrangement with the company before it is entered into. Directors must also declare the nature and extent of their interest in a transaction or arrangement that has already been entered into by the company as soon as reasonably practicable.

The key duties of a director are set out in the Companies Act 2006 (the Act).  These are duties to:

• Promote the success of the company. Directors must act in the way that they consider, in good faith, would be most likely to promote the success of the company for the benefit of its members as a whole, having regard (amongst other matters) to: (1) the long term consequences of decisions; (2) the interests of the company's employees; (3) the need to foster the company's business relationships with customers, suppliers and others; (4) the impact of the company's operations on the community and the environment; (5) the desire to maintain a reputation for high standards of business conduct; and (6) the need to act fairly between members.
  
  There is no hierarchy to these factors and, where they conflict, a director will need to use their business judgement in weighing them against one another.
  
  Companies which are "large" for accounting purposes are required to include a statement in their annual financial report describing how, during the relevant financial year, the directors have had regard to these factors when performing their duty to promote the success of the company.
• Act with reasonable care, skill and diligence. Directors must meet the minimum standard of skill and care expected of someone in their position and they must also bring to bear their particular skills and experience – therefore, the more qualified  or experienced a director is, the greater the statutory standard required of them.
• Exercise independent judgement. However, a director may rely on other people (eg through proper delegation or by seeking advice) provided they judge that it is reasonable to do so.  A director may not usually limit their discretion, however in certain circumstances they can do so by acting in accordance with an agreement entered into by the company or in a way authorised by the company's constitution.
• Act within the company's constitution and exercise their powers for the purposes for which they were given and not for any collateral purpose.
• Avoid conflicts of interest. Directors must not put themselves in a position where there is, or could be, a conflict between their personal interests or their duties to another person and the interests of the company (for example, where they are a director or employee of another company or where they may be in a position to take advantage of any property, information or opportunity they became aware of as a director).  This duty is not breached if the situation cannot reasonably be regarded as giving rise to a conflict of interest or if the situation has been pre-authorised by the board  (provided conflicted directors take no part in this decision), by shareholders or in the company's constitution.
• Not accept benefits from third parties, without prior shareholder approval.  This duty is not breached if acceptance of such benefits cannot reasonably be regarded as giving rise to a conflict of interest.  This allows for reasonable levels of corporate hospitality from third parties.
• Declare interests in proposed transactions or arrangements with the company. Directors must disclose the nature and extent of their personal interests in a proposed transaction or arrangement with the company before it is entered into.  Directors must also declare the nature and extent of their interest in a transaction or arrangement that has already been entered into by the company as soon as reasonably practicable.

In addition, directors have duties under common law, for example not to misuse the company's property and to keep company information confidential and only use it for the benefit of the company.

Directors have the duties of care and loyalty to the corporations that they oversee.  The duty of care is the duty to act with the level of care that an ordinary, prudent person would exercise under the same circumstances. In addition to becoming informed about decisions, the duty of care focuses on refraining from engaging in reckless conduct, intentional misconduct or gross negligence. The duty of loyalty is the duty to act in the best interests of the company. It includes disclosure obligations, oversight obligations and a duty to not take actions that are harmful to the company or its stockholders for the benefit of directors or management. The duty of loyalty includes a duty of good faith, which requires directors to take actions performed with an honest belief that such actions are in the best interests of the company.

Directors’ duties are codified under the Companies Act. Under the Companies Act, directors have the following fiduciary duties. Directors must:

• Exercise their powers in accordance with the Act and the company's articles and for the purposes for which the powers are conferred.
• Promote the success of the company.
• Exercise independent judgment.
• Disclose information about that director’s remuneration in the financial statements of the company.

The directors also have the following specific duties:

• Duty to avoid conflict of interest.
• Duty to not accept third party benefits.
• Duty to disclose where director is interest in a transaction or proposed transaction with the company.

The general responsibilities of directors provided for under the Companies Act are as follows:

• To take necessary measures to prevent, reduce and manage any attendant risks to the business of the company.
• Not to cause, allow or agree for the business of the company to be conducted in a manner that is likely to create a substantial risk of serious loss to a member or creditor of the company.
• When exercising powers or performing duties of a director:
  • to act in good faith and in the best interests of the company, and
  • to exercise the degree of care, diligence and skill that may reasonably be expected of a person carrying out the functions of a director.

The key duties of a director are set out in the COBE, as follows:

• To act in good faith. A director stands in a fiduciary relationship with their company which requires them to act in good faith always for the benefit of the company. This is especially so since the director is in a position of trust and confidence with the business entities and thus the law exacts the highest degree of integrity from those who control it.
• Duty of care and business judgment rule. Every manager of a private business corporation and every director or officer of a company has a duty to perform as such in good faith, in the best interests of the registered business entity, and with the care, skill, and attention that a diligent businessperson would exercise in the same circumstances.
• Duty of loyalty. A manager or controlling member of a private business corporation and a director, officer or controlling member of a company has a duty to act with loyalty to that registered business entity and, in the case of a company, towards any subsidiary of that company.
• Duty to disclose a conflict of interest. Where a director has a personal financial interest in respect of a matter to be considered at a meeting of the board of the company or a meeting of the members of the private business corporation, or knows that an associate has a personal financial interest in the matter, the person must disclose this to the board.

In addition, directors have duties under common law, for example not to misuse the company's property and to keep company information confidential and only use it for the benefit of the company.