Question

If the directors of a company make a decision, which later on proves not to be a good decision and causes the company to lose money, will the directors be liable for failure to exercise their duty of care and diligence?

Answer 1

If the directors of a company make a decision, which later on proves not to be a good decision and causes the company to lose money, then the directors will not be liable for failure to exercise their duties of care and diligence in the case:

a) The directors have exercised their powers and discharge their duties with the same degree of care and diligence that a reasonable person of the required qualification would have exercised under the said circumstances.

b) The decisions taken are in the act of the honestly deciding in the interest of the company’s better interests and future.

c) The directors has referred the decisions to be assessed objectively by the other directors in the light of been it reasonable and best interest of the company.

d) The director has referred to each rules and regulations and laws prevailing in the country at the time of taking decisions.

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