Bba 103 Corporate Presentation)

8/3/2019 Bba 103 Corporate Presentation)

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BBA 103 CORPORATE LAW

Topic : Fiduciary Duties of Directors

Group Members :

K.GunasilanA.Prakash

T.Shanmugavadivelan

M.Shaarmini

Shahiddah Bt Zamzuri

Puteri Nur Qamarina Nureen

Muftiari Bt Abdullah


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INTRODUCTION

Fiduciary duties of directors were first elaborated

by common law judges, operating without any

guidance from the formal written law. Indeed, the company laws of the United States,

and many other common law jurisdictions,

contain no statement at all of the core fiduciary

duties of care and loyalty. The fiduciary duties of directors are continuing to

evolve, again without formal written law.


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FIDUCIARY DUTIES OFDIRECTORS

Fiduciary duty means that, as shareholders

guardians, directors must be trustworthy, acting in

the best interest of shareholders, and investors inturn have confidence in the directors actions


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DIRECTORS DUTIES AND FUNCTIONS

Directors duties and individual director

responsibilities are dependent on the particular

type of company, board structure and boarddynamics.

For example, a board of directors may delegate

certain matters such as executive and director

compensation to a committee that is chaired by adirector.


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DIRECTORS DUTIES AND FUNCTIONS

(CONT) The key function of the board is to manage the

business so that it is a success and shareholders

realize returns. A directors duties greatly depend

on how the entire board of director approaches itsduties.


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BREACH OFFIDUCIARY DUTY

Directors act as fiduciaries to the corporation, and

once elected must serve the best interests of both

the corporation and all of the corporationsshareholders, not just those shareholders who the

director was elected by.


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THE CORPORATE GOVERNANCE LITERATURE

PRESENTS THEFOLLOWINGFIDUCIARY DUTIES OFBOARDS OFDIRECTORS:

Duty of due care.

Duty of loyalty.

Duty ofDisclosure.

Duty of Good Faith .

Duty to Promote Success .

Duty to Exercise Diligence, Independent Judgment,and Skill .

Duty to Avoid Conflict of Interests .

Fiduciary

Duties and Business Judgment Rules.


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DUTY OFDUE CARE

Determines the manner in which directors should

carry out their responsibilities. Failure to uphold

the set stipulations may constitute a breach of the

fiduciary duty of care of expected directors.


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DUTY OFCARE

Act

Serve

DelegateAuthority

IndependentJudgment

Attend

Obtaininformation Rely on

Experts


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DUTY OFLOYALTY

Requires directors to refrain from pursuing

their own interests over the interests of the

company. Breach of loyalty can occur even inthe absence of conflicts of interest if directors

consciously disregard their duties to the

company and its shareowners


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DUTY OFDISCLOSURE

The justification for full disclosure before a

shareholder vote is obvious: Without good

disclosure, the shareholders may not know how to

vote

The justification for full disclosure of conflict-of-

interest transactions is two-fold.


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DUTY OFGOOD FAITH

Its an important of directors fiduciary

obligations, and any irresponsible, reckless,

irrational or disingenuous behaviors orconduct can breach that fiduciary duty


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DUTY TO PROMOTE SUCCESS

Directors should act in a good faith and promote

the success of the company to benefit of its

shareholders and other stakeholders. Includes:

approving the establishment of strategic goals,

objectives and policies that promote enduring

shareholders value as well as protect existing

value


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DUTY TO EXERCISE DUE DILIGENCE,

INDEPENDENT JUDGMENT, AND SKILL Directors should be knowledgeable about the

companies business and affairs, continuously

update their understanding of the company

activities and performance, and use reasonable

diligence and independent judgment in making

decisions.


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DUTY TO AVOID CONFLICTS OF

INTERESTS Potential conflict of interest may occur when

director: receives a gift from a third party he is

doing business with, either directly or indirectly

enters into a transaction or arrangement with that

company, obtains substantial loans from the

company, or engages in backdated stock options.


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FIDUCIARY DUTIES AND BUSINESS

JUDGMENT RULES Directors operate under a legal doctrine called

business judgment rules. Under that law

directors that make decisions in good faith, based

on rational reasoning, and an informed manner

can be protected from liability to the companys

shareholders in the ground that they appropriately

fulfilled their fiduciary duty of care.


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DIRECTOR LIABILITY

One way to influence directors ethical conduct and create moreaccountability for them is to increase their legal liability for poor

performance and business misconduct.

Directors are not reasonably expected to have first-handknowledge of all company business affairs under their oversightcapacity. Nevertheless, directors are responsible for ascertainingthe validity, reliability, and quality of information provided tothem. In most circumstances, directors make decisions by relyingon information furnished by corporate

officers, employees, and professionals, including legal counsel andaccountants. Thus, the effectiveness of their performance dependson the validity and quality of the information provided todirectors.


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CONCLUSION

In conclusion, being directors of a company,there are several fiduciary duties that theyneed to adhere to.

This duties can be found by following theprinciples in common law and whereapplicable, the Companies Act 1965.

All the fiduciary duties of the directors as hasbeen discussed above must be obliged by themand any non-obligation will render thedirectors breached of their fiduciary duties.


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THANK YOU

Bba 103 Corporate Presentation)

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