Many positions of a director in company law

Directors are trustees of the company’s money and property in the sense that they must account for all the company’s money and property over which they exercise control. They have also to refund to the company any of its money or property, which they have improperly paid away or transferred.

Directors are, however, not trustees in the real sense of the word because they are not vested with the ownership of the company’s property. It is only as regards some of their obligations to the company and certain powers that they are regarded as trustees of the company.

Directors are trustees of the power entrusted to them in the sense that they must exercise their powers honestly and in the interest of the company and the shareholders and not in their own interest.

The directors of a company paid up nothing on their own shares. They however made all the other shareholders pay 3s. 6d. on each share. They did not tell the other shareholders of the difference. Held, this was a breach of trust, and the directors were bound to pay to the company 3s. 6d. on each of their shares.

The directors of a company had the power to issue the unissued shares of the company. The company was in no need of further capital but the directors made a fresh issue to themselves and their supporters with a view to maintaining control of the company Held, the allotment was invalid and void.

Trustees for the company Directors are trustees for the company and not for third persons who have made contracts with the company (City Equitable Fire Ins. Co. Ltd., Re (1925) Ch. 407] or for the individual shareholders.

The leading case on the point is :

The directors of a company bought shares from a shareholder, while they were negotiating for the sale of the company to another at a very high price and they did not disclose this fact to the shareholder. The shareholder sued to have the sale set aside. Held, the sale was binding, as the directors were under no obligation to disclose the negotiations to the shareholder.

You Might Also Like