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Directors' duty to use their powers for proper or permissable purposes

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journal contribution
posted on 2004-01-01, 00:00 authored by Jean Du PlessisJean Du Plessis
This article focuses generally on the interaction among several internal company law doctrines such as the supremacy of the articles of association; that other organs cannot interfere with powers exclusively conferred upon a particular organ; that courts will not readily interfere with internal company matters; that directors are under a duty to act in good faith and in the best interest of the company as a whole and under a duty to use their powers for proper or permissible purposes; and that there are some remedies available to shareholders if directors did not perform their powers for a proper or permissible purpose. The specific aim with the article is to establish when and why the courts will be prepared to set aside decisions by directors if they have taken them for an improper or impermissible purpose. The article concludes that the courts will be prepared to set the decisions of directors aside when they have used a particular power substantially or primarily for an improper or impermissible purpose. When the exercise of directors' powers is challenged under circumstances where there were both permissible and impermissible purposes for exercising a particular power, there is no alternative for the court but to inquire into the complex area of the state of mind of those who acted and the motive on which they acted. This is, in fact, second-guessing the decisions of directors.

History

Journal

South African mercantile law journal

Volume

16

Issue

3

Pagination

308 - 326

Publisher

Juta & Company Ltd

Location

Capetown, South Africa

ISSN

1015-0099

eISSN

1996-2185

Language

eng

Publication classification

C1 Refereed article in a scholarly journal

Copyright notice

2004, Juta & Company Ltd

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