Title: Common Law Duties of Directors & The Companies Act, 2063
Abstract: Under Common Law, duties of the directors are founded on the concept that directors are fiduciaries and so much of the case law on their duties is founded on principles originating from the law of trusts and agency. We can also find that the early part of the 20th century marked a significant shift in the way the judges of the common law courts viewed the office of director. In tandem with thisdevelopment the courts adopted a stricter approach towards the standard of care and skill expected of directors in the performance of their management roles. A concern of both equity and common law courts was to develop a corpus of rules designed to prevent directors abusing their considerable powers. The policy objectivesof the courts were based on deterrence and the result was a formidable body of reported decisions in which the judges have been developing the contours of directors’ liabilities. Theses measures were particularly created in relation to preventing fraudulent asset stripping.The situation was grim even in countries like the UK, where concept of modern company has its roots where both the Law Commission and the Company Law Review, in line with their objectives of maximizing clarity and accessibility, recommended that the duties of directors should be codified by way of a statutory restatement1. It is indeed the trend all around the globe that the powers of the directors should be pre-determined and should be addressed directly by provisions in statute in order to achieve clarity.
While all these advances were happening in the western countries, Nepal also felt the need to update the archaic provisions of old Companies which was systematically repealed by the new Companies Act, 2063 (2006), inter alia, to address these new advances in Company law, whereby fetters were sought to be placed upon the wide sweeping powers of the directors in order to curb the potential abuse. The Companies Act, 2063 [the Act hereafter],inter alia, was devised principally as reactive and preventive measure against specific abuse of powers by directors.
Publication Year: 2018
Publication Date: 2018-01-17
Language: en
Type: article
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