INCUBATION

LIABILITIES OF DIRECTOR

It is very difficult to describe the liabilities of a director The director can not delegate their authority which specifically imposed on them, which involve the exercise of judgment and discretion.

Liability for illegal acts: “Where directors have used their powers to part with moneys of their company in a manner or for a purpose which the law forbids, it is not a defence to proceedings to make them liable for their act to plead merely that they acted in ignorance of law.”

Director receiving secret commission or bribe: “A similar prohibition would also exist against the Director obtaining any secret commission or any illegal gratification for the award of a contract with the company.”

Liability for negligence: There are no objective standards of skill and care which will help in determining whether a Director has been negligent, instead, there are only general principles which may be applied depending on the facts of each case.

The director are not liable for negligence if they act honestly for the benefit of the company, and within their powers with such care as is reasonably expected of them, having regard to their knowledge and experience. The directors are not bound to bring any special qualification into their office. The mere omission to take every possible care will not amount to negligence.

Negligent misrepresentation: A company Director who knowingly makes a false representation whilst acting as Director can be held personally liable not only in deceit, but also for negligent misrepresentation.

Liability for breach of warranty of authority: A Director is not personally liable for his company’s failure to perform a contract which he had made on its behalf, but he is liable in damages to a person with whom he purports to make a contract which is not binding on his company at all. When a director representing a company negotiates a contract he impliedly represents to the other contracting party that he has authority to bind the company as its agent.

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