A critical exploration of the fiduciary duties of a director to act in good faith and for a proper purpose in respect of a company and an evaluation of the developments from common law to statute.

Abstract

The subject of fiduciary duties of directors is viewed as a cornerstone of modern company law. The subject of fiduciary duties of directors is of paramount importance as directors have an abundance of discretionary powers that has far reaching consequences for the company itself and society in general. This study aims at understanding and exploring fully the fiduciary duties of a director of a company to act in good faith and for a proper or permissible purpose. The study seeks to explore these two fiduciary duties in terms of the common law as well as statute being the Companies Act¹ (2008 Act). The study goes on to explore the relationship between the extensive common law on the subject of fiduciary duties and the now partial codification of these duties in section 76(3)(a) of the 2008 Act and articulates the current extent to which the common law is still relevant. This subject has been explored extensively in the past, however, this study seeks to revisit the subject from a new angle and explore the connection between the common law and the now partially codified version of the fiduciary duties of directors. This study also seeks to supplement the chasm in the existing literature regarding the fiduciary duty of a director to act for a proper purpose. Finally, this study aims at fully interpreting the primary duty of a director to act in good faith and for a proper purpose so as to assist directors in understanding what is expected of them and thus resulting in mitigating the negligent breaching by directors of companies their fiduciary duties. Further, this study will set down the current position of the relationship between the common law and statute in terms of modern company law.