General statutory duties of directors
S. 171 – Duty to act within powers
S. 172 – Duty to promote the success of the company
S. 173 – Duty to exercise independent judgment
S. 174 – Duty to exercise reasonable skill, care and diligence (non-fiduciary duty – only recourse in case of violation is damages)
S. 175 – Duty to avoid conflicts of interest (situational conflicts)
S. 176 – Duty not to accept benefits from third parties (in exchange for an undertaking or just for being a director
S. 177 – Duty to declare interest in an actual or proposed transaction with the company
==> as opposed to s. 182 CA where a director has to declare their interest in an existing transaction with the company as soon as practicable after the conflict arises. Failure to do so constitutes a criminal offence.
Recourse against a director in case of breach
- Disqualification order
- Removal of director by OR (s. 168 CA)
- Civil claim against the director on behalf of the company
- Derivative action (s. 260 CA)
- Unfair prejudice action (s. 944 CA)
- Challenge transactions if the company was in the midst of insolvency
Remedies available in case of breach
- Damages
- Rescission of the director’s contract
- Restoration of property lost / damaged
- Account for profits
Protective (proactive) measures available to directors
- Insurance
- Contractual indemnity (against third parties’ claims by the company in case of breach) –> in the employment contract
Relief for directors available (reactive)
- s. 239 CA - Ratification by the members by ordinary resolution
- Check if MA 14 applies - i.e. votes by interested directors who are also members would not count towards quorum if done at a GM. The resolution would pass as long as the GM would have quorum without their votes.
*If voted via WR - interested directors cannot vote!!
- Ask for Court Relief – s. 1157 CA – the court has the discretion to grant relief to directors at fault who have breached their fiduciary duties if they acted reasonably and honestly and ought to be fairly excused.
