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Breach of Director’s Duties / Director’s Liability

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Directors are subject to strict duties under general law and statute. This is because the control they have over their company’s overall governance and management creates an opportunity for them to misuse their position, and places company shareholders (especially passive investors) in a vulnerable position.

In equity, a director owes a fiduciary duty to their company which imposes both positive and negative duties. A director’s positive duties in equity include to act in good faith and in the company’s best interest, and to act for a proper purpose.

Whilst their negative duties include to not misuse their position, or information obtained by virtue of their position, to gain an advantage for themselves or another, or to cause detriment to the company. At common law, a director owes a duty of care to the company which imposes its own responsibilities.

A breach of a director’s duty can result in the director’s disqualification from their position, civil and or criminal sanctions, and severe commercial consequences, which makes obtaining legal advice essential when a breach occurs. A director may be exonerated in relation to a breach if they acted honestly and in all the circumstances ought fairly to be excused, and in respect of a breach of duty of care, a director may defend their actions on the basis of the statutory business judgement rule.

Whether you are a director who has been accused of breaching their duties, or who has received a penalty notice, or are another party considering bringing proceedings against a director who has committed a breach, contact Dormer Stanhope today and we will help you gain an understanding of your options for defending yourself or pursuing a claim.

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