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Chapter 9

Breach of directors’ duties

Directors owe their duties to the company as a whole. This has
traditionally been taken to mean to the shareholders as a collective
body, which includes present and future shareholders.

The directors owe no general duty to individual members: Percival v
Wright (1902).

If a director breaches their duty that breach may be subsequently
ratified by the members, subject to the rules regarding ratification seen
in Chapter 4 (agency law).

Breach of duty may carry the following consequences:

 The director may be required to make good any loss suffered by
the company.

 Contracts entered into between the company and the director may
be rendered voidable.

 Any property taken by the director from the company can be
recovered from him if still in his possession.

 Property may be recovered directly from a third party, unless that
third party required it for value and in good faith.

 An injunction may be an appropriate remedy where the breach has
not yet occurred.

S.232 provides that any provision to exempt a director from or
indemnify him against any liability for breach of duty or negligence is
void.

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