This article is about the legal duties of directors. For their official duties, see
Board of directors.
Directors' duties are a series of statutory, common law and equitable obligations owed primarily by members of the board of directors to the corporation that employs them. It is a central part of corporate law and corporate governance. Directors' duties are analogous to duties owed by trustees to beneficiaries, and by agents to principals.
Among different jurisdictions, a number of similarities between the framework for directors' duties exist:
- directors owe duties to the corporation,[1] and not to individual shareholders,[2] employees or creditors outside exceptional circumstances
- directors' core duty is to remain loyal to the company, and avoid conflicts of interest
- directors are expected to display a high standard of care, skill or diligence
- directors are expected to act in good faith to promote the success of the corporation
- ^ e.g. Percival v Wright [1902] Ch 421
- ^ e.g. Coleman v. Myers [1976] NZHC 5, [1977] 2 NZLR 225, High Court (New Zealand), where the board is authorised by the shareholders to negotiate with a takeover bidder. It has been held in New Zealand that "depending upon all the surrounding circumstances and the nature of the responsibility which in a real and practical sense the director has assumed towards the shareholder,"