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Director’s Duties – Duty of care and skill

Directors have historically been subject to duties under company law.

A director must exercise care and skill that can reasonably be expected of them.

In Jurong Readymix Concrete Pte Ltd v Kaki Bukit Industrial Park Pte Ltd [2000] 4 SLR 723 the Court held that “A diligent director would be expected to seek the advice of his fellow directors or a professional advisor on matters that he is not familiar with and not make unwarranted assumptions about the conduct of the company’s business without making proper inquiries.”

It can be quite difficult to get a fix on exactly what the court means by the above. Understandably, the pronouncements are wide enough to include the myriad of situations one may encounter in the wheeling and dealing of the business world.

The long and short of it could be said that if the director delegated a duty that a reasonable person would not have delegated, then he could be liable for any loss the company suffers as a result of that delegation. A director should also seek advice where appropriate.

For example, in the Jurong Readymix case, the director procured the company to give a guarantee which the company need not have given, and the director did this without fully appreciating the circumstances and without consulting with his other directors and without the benefit of legal advice. The Court ordered that the said director should compensate the company for damages suffered.

Please note that this article does not constitute express or implied legal advice, whether in whole or in part. If you require legal advice, please contact us at: 

walter@silvesterlegal.com or info@silvesterlegal.com.

 

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