A study of the impact of company legislation on the fiduciary duties of directors with regard to contracts with the company
A company, as a separate legal personality, is not able to act on its own accord. It must necessarily participate in legal transactions through natural persons acting on its behalf. Directors are the persons who act on behalf of the company in transactions with third parties. Their functions and responsibilities arise by virtue of the company as being a separate legal personality. The company acts through its organs. One of its organs is the board of directors, which is entrusted with the management of the business of the company. The other organ, through which a company acts, is the general meeting of the company, which is not the object of this study. The management of a company can only be effective if the directors are empowered with sufficient discretion to exercise their powers in an effective and efficient manner. However, it is also important that members of the company in its general meeting exercise effective oversight over the management of the company by the directors. It is, however, not easy for members to exercise judicious control over management because of the diversity and dispersal of shareholders. Hence, directors are subject to various duties, which are normally classified as the duty of care and skill, and the fiduciary duties. The effective control of the directors is dependent on the enforcement of these duties, which are based on common law.
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