Once a person accepts their appointment as a director on a board, they have a fiduciary...

Once a person accepts their appointment as a director on a board, they have a fiduciary duty.

List four aspects of their fiduciary duty and discuss the meaning and implication of each. You

may also use practical examples to explain what it entails.

(12)

Expert Solution

Every director on board has fiduciary relationship with the company which means director acts on trust of the company. The director has no fiduciary relation with shareholders.

Aspects of fiduciary duty;

Duty of care: The director must take decision based on his prudence after proper due diligence of the information and situation of business.

Duty of loyalty: This provides for director to be responsible to the company for all the acts done by him on behalf of the company. There should not be personal gain out of action taken on company's behalf. For example, accepting a tender from sister concern of the company which gives commission to the director externally.

Duty of law: Every officer of the company must act according to the law prescribed. Avoiding law will result in huge penalty both to director and company.

Duty to act in good faith: The director must act in the best interest of the company and its stakeholders. This is the fundamental of trust of the company on its director. Director should consider effects from view point of company and act wisely.

Eg.1 Director must be independent of stakeholders so that influence of particular group doesn't affect his business.

Eg.2 Proper conduct and participation in business decision making result in effective growing of business.

jeff jeffy answered 1 year ago

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