Explain the duties of directors under the Companies Act No. 7 of 2007.
How to lay out the answer. Follow the frame, then write it in your own words.
1 · Open in two lines. Directors manage the company through the board and stand in a fiduciary position towards it.
2 · Good faith and proper purpose. Act in good faith in the company's best interests; use powers for proper purposes.
3 · Compliance. Follow the Companies Act and the articles.
4 · Care, disclosure and confidentiality. Not reckless or grossly negligent; skill and care expected of a person of his knowledge and experience; disclose interests; keep company information confidential.
5 · Duties to protect creditors and shareholders.
Insolvency: call a board meeting at once if the company cannot pay its debts as they fall due.
Serious loss of capital: call an extraordinary general meeting.
6 · Consequences of breach. Compensation, removal, disqualification, personal liability in some cases.
7 · In Sri Lankan business. Independent directors on listed boards; a small-company director who keeps trading on credit after he knows it cannot pay its debts.
8 · Close in one line. Directors run other people's money, so the law holds them to high standards.
Scoring tip: Use the duty names as headings. Add one practical example for the duty on insolvency.
