A Director owes fiduciary duties towards the company, and not to individual shareholders, creditors generally consists of the following:
· Good faith and bona fide acts: Directors must act honestly, without negligence and in good faith in the bona fide best interests of the company.
· Proper use of Powers: Directors must not exercise the powers conferred upon them for purposes different from those for which they were conferred. Notwithstanding that Directors have acted in honest belief for what they believe to be for the benefit of the company, they may nevertheless be liable for improper use of their powers, especially for purposes collateral to what they have been conferred for.
· Unfettered Discretion: Directors must not fetter their discretion for any reason whatsoever. They cannot validly contract or act pursuant to any arrangement either with one another or with third parties as to how they shall vote at board meetings or otherwise conduct themselves in the future.
· Lack of Conflicting Interests
Directors have to make continuous disclosures of their interests in the various transactions of, and with, the company. A Director cannot enter into a contract with the company without its informed consent, even if there is no unfair advantage to be gained, or abuse of position, by such Director.
Directors cannot use, without the consent of the company, the company’s properties, opportunities or information for their own profit. In order to establish a breach of this duty, it must be shown: (1) that what the Directors did was so related to the affairs of the company that it can be said to have been done in the course of their management and in utilization of their opportunities and special knowledge as Directors, and (2) that what they did resulted in a profit to themselves. The English Courts, adopting a strict approach, have held directors to be in breach of this fiduciary duty, even if the opportunity was not one which would have been of use to the company.
Directors have a duty not to compete with the company, which is in many respects a corollary of the immediately preceding rule.