Members vs Directors of company: who wins?

The directors are bestowed with powers to act in the best interest of the company. Directors are given such powers in the article of the association of their company. Often they collide with the direction of the members, shareholders and creditors as to whether or not the directors are acting for the best interest of the company or vice versa. Quite often the members and the directors will have different views in determining what is best for the company. Since then, the law have been developed in order to distinguish the powers between the directors and the members. At the early historical development of company law where division of powers between the members and the directors may concern, director seen as nothing but agent. The General meeting and the board of directors are integral part of the company.

Basically we will have to look into the article of association to see the powers of the members and the directors, but in default situation, we have to refer to article 73 Table A of the Companies Act if only the company follows Table A.

Director acts in accordance with the resolution passed by Board of Director’s meeting. Directors are empowered to act on behalf of the company since the company is only an artificial person. The shareholders who have invested their money in the company are given voting power on certain matters reserves to them under the company’s articles of association, the Companies Act and the general principles of law to determine the company’s course of conduct. Meanwhile Board of Director involve in the management of company’s affairs. However conflicts always occur between Board of Director and the shareholders in deciding what the company capable of. The issue here is whose direction will prevail? In resolving this issue, company law have divided the authority of these two entities of a company by referring to the provision in Companies Act 1965 and the articles of association. Management powers has expressly been given to the Director as determined by the articles and memorandum of association , with specific statutory provisions requiring certain conduct of director to be subjected to shareholder’s approval. Management power of Board of Director is bestowed under Article 73 of Table A, Fourth Schedule, Companies Act 1965 which provides that:

The business of the company shall be managed by the directors who may pay all expenses incurred in promoting and registering the company, and may exercise all such powers of the company as are not, by the Act or by these regulations, required to be exercised by the company in general meeting, subject, nevertheless, to any of these regulations, to the provisions of the Act, and to such regulations, being not inconsistent with aforesaid regulations or provisions, as may be prescribed by the company in general meeting; but no regulations made by the company in general meeting shall invalidate any prior act of the directors which would have been valid if that regulation has not been made. Read more of this post