''Acting in good faith for the best interest of the company''

Directors duties to the company and creditor:

1. Ensure that the company's affair being managed properly

2. Ensure the assets are not being exploited for directors interest ;

3. Any act that may prejudiced the interest of creditors.

As trust has no power to purchase more shares, B and T decided to acquire shares themselves. B represented the trust (attended AGM and obtain information on share). B & T purchased shares and obtained controls. They reorganised the company and all is done in good faith and with object of enhancing the trust holdings.

Held: D acted honestly but he breach the fiduciary duty as he was a solicitor. His action arose conflict of interest as he obtained a personal profit while in fiduciary duty.

No conflict of interest between directors and the company.

The trust was a minority shareholder in a private company which was not effectively managed. B acted as solicitor to the trust and he purchased necessary shares to gain control over the company with T. He reorganized the company and B done this with good faith. However conflict arise when B gain profit from shares.

Held: D acted honestly however he is a solicitor and the personal gain of profit while in fiduciary duty arose the conflict of interest. D could only escaped his duty by informed consent from principle.

Held : Knowledge held by D must account to the trust for any profits made out of it. Persons may however, be entitled to payment at liberal scale for their work and skills

Circumstances where director's personal interests in conflict with the company

Circumstances where director's personal interest in conflict with the company [S.218]

S.218 (a) - Directors use the company's property

S.218 (c) - Directors use the information acquired by virtue of his position

S.218 (d) Directors use any opportunity of the company which he became aware of, in the performance of his function as director.

S.218 (b) - Directors use his position as a director to gain personal profit

S.218 (e) - Directors are in competition with the company

Held : M had clearly breached his fiduciary duty owed to the joint venture when he mized its funds with that of his other company.

Marco was a director of Totex as well as director and shareholder of Adon. Totex-Adon was formed to conduct a joint venture. According to the term of agreement, Totex-Adon was to purchased goods from Totex then sell them to Queensland. However Marco had failed to account to it for proceeds for the sale of its goods.

M failed to account to it proceeds for the sale of its goods. The evidence disclosed that M has failed to open a separate bank accounts for the plaintiff in Queensland and all its receipts and payment were deposited in and come from Adon's own account.

A director of a company which was in financial difficulties was held to have made improper use of his position when he had the company repay loan it owed him to the possible detriment of other creditors of the company.

A director use his position to get the company to repay its debt to him to the point his action detriment other creditors.

Held: The directors had made their profits ''by reason of the fact they were directors of Regal and in the course of the execution of that office. Court held that the directors therefore had to account for their profits to the company.

The directors had not gained fully informed concern from the shareholders regarding the lease of two more cinemas under the subsdiary and the profit from the sale. Shareholders brought action sayin that the profit was in breach of the directors fiduciary duty towards the company.

Directors use any opportunity if the company which he became aware of, in the performance of his function as director.

The directors diverting a contract from the company into their own names.

Held: The benefits of the diverted contract was held on constructive trust for the company. They directors were to account to the company for the profits they have made from their wrongdoings.

Directors are in competition with the company

Held : There was fiduciary duty. Director who was former employee of a company may set up similar business but should not exploit any opportunity or confidential information obtained from previous position as director.

Several key personel of Avel resigned from the company and formed a firm with the same line as Avel. STMB terminate the contract with Avel as Avel does not inform about the resignation of the key personnel. System Television Malaysia Berhad then continue the project with Perunding AJZ.

The case involved take over of the business.

H is the majority shareholders at Miller. The directors of Miller wish to attract higher bidder so they transfer their share to A so that H became minority shareholders.

H sought a declaration from the court that the share issue was undertake for an improper purpose

Howard Smith Ltd v Ampol Petroleum Ltd

Winkworth v Edward Baron Development Co.Ltd

Regal (Hastings) Ltd v Gulliver

Duties of reasonable care, skill and diligent

The large scale fraud by the chairman result in the liquidator sued the other directors for neglience

Company lost money in investment failure and the large scale of fraud by the chairman. Liquidator sued the other directors for neglience

Some of the directors had been negligent in regard of the fraud and investment failure but there was a valid exclusion of liability clause in the articles