Powers, duties & liabilities of directors of a company in Tanzania [notes

This post covers the powers of directors in company law.

Generally, a company has no physical existence, it is just an artificial legal person, and hence it cannot manage its own affairs without having a natural person.

A Natural person is able to manage the affairs of the company and they are usually called directors.

Directors are regarded as the organ of the company for whose action the company is to be held liable just as a natural person.

Powers of Directors

Directors of a company have powers necessary for managing, directing, and supervising the management of the business and affairs of a company.

Directors are required to exercise those powers for the proper purpose, in good faith, and for the best interests of the company.

Control of Powers of Directors

Although The Companies Act vests powers to directors of a company, those powers are subject to controls by the same Act as follows.

Judicial Control

Here the court may appoint one or more competent inspectors to investigate the affairs of a company and to report thereon in such manner as the court directs.

This is to the effect that, when directors exercise their powers in a manner that affects the affairs of a company, upon the application of the members of a company, the court may appoint a competent inspector to investigate.

Through this, the law ensures that the powers of Directors are not abused.

Control by Members of the Company

The law controls the power of directors by allowing the members of the company to remove a director before his expiration of time in case of abuse of power or any other reasons.

The law is to the effect that a company may by ordinary resolution remove a director before the expiration of his period of office notwithstanding anything in its articles or in any agreement between it and him.

Control by the Registrar of the Company

The law ensures the control of the power of the directors through the Registrar of the company.

The Registrar of a company has the power to call for information if he believes and has reasonable cause to do so.

In case the Registrar finds that the directors of the company abused his powers, the registrar has the power to report the matter to the court for further action.

Duties of the Directors of the company

The law has set some of the duties to be carried out by the directors

Duties of directors are usually considered under the following broad terms namely;

1. Duty of care and skill
2. Duty to act in good faith and in the best interest of the Company
3. Duty to disclose an interest

Directors’ Duty of care and skills

The company law requires the directors to act with due care.

They are required to exercise care, skills, diligence, and knowledge the same as a reasonable man with the experience put in their position could have used.

He is also expected to use any special knowledge or experience that any director of his type is expected to have.

But he does not owe his company a duty to take all possible care or to act with the best car. He needs not to show in his performance of his duties a greater degree of skills than may reasonably be expected from a person of his knowledge and experience.

The duty does not prevent a director from relying on the advice or work of others, but the final judgment must be his responsibility.

At all times directors should know at least what is happening in a company

Ignorance is not a defense and a director may be jointly or severally liable for any mistakes made.

Directors’ Duty to act in good faith and in the best interest of the company

Directors have a duty to act bonafide and in good faith in the interest of the Company