CONSEQUENCES OF DIRECTORS’ BREACH OF DUTY

Abstract

The company is a fictitious legal entity whose important organ is the Board of Directors. The directors have a duty to uphold the company's Constitution and a legal obligation to act in its best interests by advancing the company's success for the benefit of the company and its members. Where they fail to live up to these expectations, the company may become infected with a dangerous plague, pandemic, incurable disease or organ failure, which may eventually lead to its death. The directors, being humans, are unpredictable and fallible. They are bound to inadvertently make mistakes, negligently fail in their duties or willfully act or conduct themselves in manners that may lead to the failure of the company by way of bankruptcy, insolvency, liquidation and winding up. In order to ameliorate the company from passing through the above anomalies, statutory duties are put in place, which if strictly followed, the misfortunes would not be experienced. Consequences of breach of directors’ duties are also put in place statutorily and at Common Law to enable directors strictly observe their duties. This article adopted the doctrinal research methodology. It examined director’s duties under the Companies and Allied Matters Act, 2020, as well as the duty of care as enshrined in section 174 of the United Kingdom’s Companies Act, the factors that may lead to directors’ breach of duty, and after which, it proffered solutions on the way forward for the smooth running of a company. It recommended for a continuous teachings or training for directors for them to be at par with current reality.