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Breaches Of Directors’ Duties And Corresponding Offences

Along with the power and responsibilities of directors come certain provisions in the Companies Act defining offences and breaches and their corresponding penalties. These are all part of defining the limits of a director’s power, as well as in maintaining order within the company.

A director’s common law duties are enforced by the company while his or her statutory duties are enforced by a certain regulator. These are the entities are authorised to deal with any breach in common law or statutory duties.

What are these common breaches?

   1. Failing to act honestly and with reasonable diligence: This breach is in violation of Section 157(1) of the Companies Act.

   2. Improper use of information: This is in violation of Section 157(2) of the Companies Act as well as common law. This means that the director will be held liable to return to the company any profits he or she has made resulting from the improper use of information. The erring director will also be fined not more than $5,000 under Section 157(3)(a) or imprisoned for not more than a year under Section 157(3)(b).

   3. Failing to disclose potential conflict: If a director is found not to have disclosed potential conflicts of interest in any transaction, or else arising from his or her position, will be fined no more than $5,000 or imprisoned for not more than a year under Section 156(10).

Other possible offences include criminal and civil violations. In this case, a director would have to be subject to the state’s usual procedures for criminal as well as civil offences, and will be charged accordingly. In case of stealing from the company, the director would be charged with aggravated theft. If he or she misappropriates properties, he would have to face criminal breach of trust. Likewise, if proven guilty, the director will be subject to the appropriate penalties and/or punishment.