In a company, a director is a person employed as an officer of a company and has a duty to perform the duties of management of the business of the company. The relationship between directors and their company is classified by the law as a ‘fiduciary relationship’: Hospital Products Ltd v United States Surgical Corporation1. The fiduciary relationship is based on imposing restriction on those people in a position of power over others who may be vulnerable to harm through the exercise of that power. In addition, directors and other offices own a fiduciary duty to the company due to they are the people who control the company and the people who make decision for the company. Therefore, fiduciaries are important in a company.
In common law, directors own a fiduciary duty to the company because it is vulnerable to their actions and relies on the directors and officers to act property. The fiduciary duties of directors, which are generally based equitable principle in common law. Breaches of this duty allow a company to sue the director for damages suffered. There are four obligations governing corporate behavior. First is duty to act in good faith, in the best interest of the company. The company officers are not use the information which they obtained because of their position to gain advantage for themselves or cause detriment to the corporation. In Re W & M Roith Ltd2, the claim in liquidation was rejected, and held that the pension was neither benefit to company nor help it carrying on business. On the other hand, in Re City Equitable Fire Insurance Co Ltd3, Romer J examined the origins of the duty of care as an incident of the director’s general fiduciary office. The degree of care and diligence was that which a person would apply in his or her own affairs. He also considered the difference between the duties owed by directors as opposed to duties of a trustee.
Then the following is duty to avoid conflicts of interest. It is important that the directors are...