Directors of the company and their fuctions.

 PRELIMINARY

A company from juristic point of view is a legal/artificial person.  It has no body or physical existence.  As such it cannot act in its own person.  It can only act through directors. 

It was observed in Furguson v Wilson  that, “The company itself cannot act in its own person, for it has no person; it can only act through directors, and the case is, as regards those directors, merely the ordinary case of principal and agent”.

The directors are a body or panel to whom is delegated the duty of managing the general affairs of the company.  A corporate body can only act by agents, and it is of course the duty of those agents so to act as best to promote the interests of the corporation whose affairs they are conducting. The persons who are in-charge of the management of the affairs of the company are termed as directors.  They are collectively known as the Board of Directors.  The importance of the directors is that they are the brains of the company.

Section 2 of The Companies Act  defines director to include any person occupying the position of director by whatever name called. A person can be called by whatever name, but the duties of the office he/she occupy can determine the position he/she holds. Any person having control over the direction, conduct, management or superintendence of the affairs of a company is a director, in some cases, a director may be called chairperson, president, executive officer, trustee, agent or managing partner.

A number of directors who constitute board of directors is limited to both private and public companies. A minimum number of directors is two as provided under section 186 of Companies Act.  Not anyone can qualify to be a director of company, a person is permitted by the law to be a director of, he has attained age of majority, he has a sound mind, not disqualified by any law or order of the court and other additional requirements as will be stipulated in memorandum and articles of association of a company. Section 194(1), 197, and 190 provides on general qualifications for a person to be appointed as a director of a company, 

FORMATION OF BOARD OF DIRECTORS

There is no one standard form on formation of board of directors. It depends on the laws of the state, some countries require two to three directors during the registration phase of a company, but after Incorporation, shareholders are permitted to restructure the board as they think fit within limits of the laws of the state and within scope of company's bylaws (memarts). 

In Tanzania, during formation of a company, a promoter together with other documents will submit to registrar, two name of appointed directors for the purpose of registration. The appointed directors can later be removed by shareholders through shareholder’s meetings. Appointment or removal of company directors is done through votes of shareholders on agenda to appoint or to remove a director. There must be reasonable grounds to remove a directors from position, since they cannot be removed randomly without causing effects to the company.  

It is quite different when comes to public corporations when government is a sole shareholder. In these corporates, a minister responsible for a particular corporate under his/her ministry, is responsible to appoint members of the board of the corporate while president is empowered to appoint chairman of the board. Section 8 and 9 of The Public Corporations Act .

Example of corporates under The Public Corporates Act  whose members of the board are appointed by minister responsible for the particular Corporate and chairman of the board is appointed by president includes TANESCO, Tanzania Agricultural Development Bank, Tanzania Petroleum Development Corporation, Tanzania Ports Authority, Tanzania Telecommunications Corporation, Tanzania Railways Limited, Tanzania Standard Gauge Railway, TAZARA Railway, Zanzibar Electricity Corporation etc

For private companies, all powers to deal with appointment and removal of directors is on hands of shareholders. The AGM and EGM are the forum where the appointment or removal of directors is done through resolutions. This is quit different to formation of board of directors to the public corporates when a government is a sole shareholder, president and minister responsible for a particular ministry are empowered to form board of directors to public corporates. 

DUTIES/FUNCTIONS OF DIRECTORS

Having been elected to office, directors become responsible for the company money and assets. As such, in the absence of any legal controls, the directors have powers to deal with corporate properties. As trustees, the directors become subject to fiduciary duties. On the other hand, the directors are in practice conferred with almost unlimited powers by the company Articles of Association. The agency principle relates to the exercise of directorial powers in that the directors, as agents, owe a duty to exercise their directorial powers carefully, skillfully and with diligence.

Directors of the company have duties to act with good faith for the interests of the company, they manage workers and subordinate employees, they act on behalf of a company as agents, and to perform all other supervisory functions. Directors are representative of a company, they sign or enter into contracts on behalf of the company.

Directors are trustees of the company’s finances and property in the sense that they must account for all the company’s finances and property over which they exercise control.  They have also to pay back to the company any of its money or property which they have mis-used.  Directors are trustees of the power entrusted to them in the sense that they must exercise their powers honestly and in the interest of the company and shareholders and not in their own interest.  In Percival v. Wright the directors of a company had the power to issue the unissued shares of the company.  The company was in no need of further capital but the directors made fresh issue for themselves and their allies with a view to maintaining control of the company. It was held that the allotment was invalid and void as they exceeded their powers (ultra-vires).

The director have a duty to the company to exercise the care, skill and diligence which would be exercised in the same manner by a reasonable person having both the knowledge and experience that may reasonably be expected of a person in the same position as the director, and any special knowledge and experience which the director has. A director is not expected to perform company duties with less quality which puts a company into danger of loss or destructing relation with customers or shareholders, a director is not expected to be suspected of using company assets for his own benefits etc

SERVANTS OF THE COMPANY

A director is not a servant of any master within a company. He is the controller of the company’s affairs. Director of a company is not an employee or a servant to the company. They are professional people who were hired by the company to direct its affairs.  Servants of the company are all other employees who of the company apart from directors and shareholders. Secretary, and all other subordinate employees of the company are servants of the company because they follow orders from top officers of the company.

CONCLUSION

Directors are officers of the company because they perform core duties of the company. Directors are divided into several types, one is executive directors who controls the day to day functions of the company, second is non-executive directors,   the directors who are not involved in day to day management of the company. They are appointed from outside the company. These are commonly found in large companies and have advisory and supervisory roles. Third is a shadow director who is a person in accordance with whose direction or instruction the directors of the company are accustomed to act. There is also alternative directors, de-facto directors etc