The directors cannot be held personally liable for any default of the company. Like agents, directors should conduct business of the company with care, skill and diligence possessed by them. They are accountable for all of company’s assets under their control, and the profits from assets of the company.

Directors cannot deal on their own, and are required to disclose their personal interest, if any, in any transaction of the company. The position of directors is defined by Cairns L. J. in Ferguson v. Wilson: “They are merely agents of the company. The company itself cannot act in its own person, for it has no person, it can only act through directors, and the case is as regards those directors merely the ordinary case of principal and agent, for wherever an agent is liable, those directors would be liable. Where the liability is of principal and principal only, the liability is the liability of the company.”

We Will Write a Custom Essay Specifically
For You For Only $13.90/page!

order now


As Trustees:

Directors are also described as trustees of the company as they stand in fiduciary capacity towards the company. They must account for all the moneys over which they exercise control. Their acts and dealings must be for the benefit of the company. They must exercise their powers honestly in the interest of the company and all the shareholders, and not their own sectional interest. The directors of a company are trustees for the company with reference to their power of applying funds of the company. For misuse of the power they could be rendered liable as trustees. “Directors are the persons selected to manage the affairs of the company for the benefit of shareholders. It is an office of trust, which it is their duty to perform fully and entirely.

” This peculiar nature of their office is one of the reasons why the directors have been described as trustees.

3. As Managing Partners:

Directors represent the shareholders to conduct the business of the company on their behalf. They enjoy vast power of management over the company and perform many functions which are in the nature of the proprietary, for example allotment of shares, raising of loans, investment of funds of the company. This gives the impression of directors being the active partners and the shareholders appointing them as dormant partners. The very facts that most of the times, directors themselves are the significant shareholders in the company strengthen the argument that directors are the managing partners of the company.

But this may be true only partially as unlike partners directors cannot bind other shareholders by their dealing, and dissimilar to partners directors are elected and are subject to retirement also. In the real sense the directors are not the agents completely nor the trustees nor the managing partners. The position of directors combines all the three and more than that also. Directors are paid agents or officers of the company and conduct business for the company without being the legal owners. In fact, the directors are commercial men managing a trading concern for the benefit of themselves and of all the shareholders in it. Directors of a company have fiduciary relationship with the company as well as the shareholders when they act as agents or officers of a company.