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

No, decision making in the management is not always successful but it should be done appropriately after a certain movement of various factors and they should be trying to determine interest of the shareholders and they should be trying to act in the best possible way in order to maximize the value but it can be seen that not always every decision is successful but it will not mean that the management was not acting in full faith and they cannot be held responsible for failure of some decisions so it can be said that if the director of a company is making a decision which is not a good decision and which can cause the company to lose money, the director will not be liable for failure to exercise their duty because they have acted in true faith and acted for protection of the interest of stakeholders.