Question

duty of care, and the Business judgement Rule

A letter of complaint by a customer has come to the attention of the directors of the company ( Joseph, Kenesha Deanna and Jahmaria) that the company's supermarket premises are in terrible need of renovation and proper upkeep.

1) As a directors, what must they do in order to exercise their duty of care and diligence properly?

Explain fully the legal duty to them.

explain the practical steps that they must take in order to have the premises renovated.

2) If they repair the property and someone falls due to a crack left by the contractor, the company will be sued. can the company then successfully sue Joseph, Kenesha Deanna and Jahmaria as director? fully explain your answer

give full conclusion and analysis of the matter

Answer 1

Answer 1:

In order to exercise their duty of care and diligence the Directors must do the following:

a. Check the supermarket against which the complaint letter has come.

b. Choose appropriate measures to overcome the issues found in the supermarket.

The legal duty of the Directors:

It is the duty of the Director to exercise care and diligence for his company. The duty of care mandates that a director acts in good faith and uses the same degree of care that an ordinary person would exercise in a similar situation. In case of any breach of the duty of care and diligence, the Director is held personally liable.

Business Judgment Rule:

According to this rule, a Director can make any judgment for the company in good faith and in the best interest of the company. It is the duty of the Director to make a judgment with a duty to care for the company.

The practical steps to be taken by the Directors are as follows:

a. The Directors should visit the complaint Supermart premises or delegate this work to a representative from their company on their behalf.

b. Prepare a report on the condition found.

c. Draft a plan and assign works to the employees of their organization.

d. After completion of the work, visit and finally check the desired renovation and proper upkeep as per the guidelines provided.

Answer 2:

The company cannot sue its Directors. However, if in case a company is being sued then it comes over Directors automatically because Directors are authorized signatory or representatives of the company.

Moreover, after the repair, if any injury happens to any third person under the supermarket premises then the Directors are held liable. Because it was the duty of care and diligence of Directors.

Conclusion and analysis:

It is the statutory and legal duty of the Director(s) to provide care and diligence to its company and related matters. In case of any breach, the Director(s) can be held personally liable by the injured party. Similarly, in one of the above cases, the Directors of the company received a complaint letter regarding renovation and upkeep issues of the supermarket premises. And, immediately on receiving the letter, it becomes the duty of the Directors to take appropriate actions and steps to resolve such issues. In case of any failure and subsequent consequences if any, the Directors will be held liable. Moreover, the Business Judgment Rule can be applied only if the Director has taken any action or judgment in good faith and the best interest of the Company.