Analyze 4 real cases of directors liability and lessons learned - Essay Example

Cases of Directors’ Liabilities The first case is the Lower v. Traveller & Another. Here, the court decided against hearing the appeal by the director about the findings in the case. The director had taken certain business transactions that put the company at risk since they were illegitimate. The court decided that since the duty of care had not been put into consideration, the company had to close down. The director was, therefore, personally responsible for the debts the company would incur.

Had the director put into consideration the act of good faith, the company would not be at jeopardy (Hopt and Teubner 85). Here, the director was liable for failing to act as stated in the company’s statutes. He, therefore, was responsible for breach of duty of diligence. The second case is about Limited v. Burns. The director was found guilty of running the company recklessly. The guilty verdict came as a result of finding the director guilty of the offense. The judge decided that the duty of care was clearly violated by the director.

He was, therefore, liable for failing to act in the company’s statutes. He did not put into consideration the act of good faith while dealing with the company’s affairs (Webster 46). There were certain risks that were apparent but the director knew this, but still went ahead and did these transactions. In the third case, the director was found liable for acting under fraudulent means. Fraud can lead to serving a jail term (Webster 58). This was in the case of Lexi Holdings v. Said Luqman and Others1.

Luqman used fraudulent means to acquire money from the company that had entrusted him with the task of paying in receipts to one bank account. He, however, transacted money to some other bank accounts that belonged to him, and some of his associates. He was liable for breaching the trust bestowed on him by the company. After being caught, he failed to disclose all his assets for fear of being arrested and jailed for fraud. This led the court to find him in contempt of court. He was jailed for eighteen months since he had acted outside the duty of obedience.

The fourth case is identified as a breach of duty of care or diligence. This is in the case of Cellar House Limited. The director was fully responsible for reckless trading. He was found to be guilty of other breaches as well, for example, breach of loyalty. He was responsible for having the company in debt, and was forced by the court to pay over 1.7 million dollars. The activities that he conducted for the company were illegitimate. He did these transactions without the knowledge of the company creditors.

He was personally liable for not caring about the success of the company. At this point, the court cannot be lenient with the director since he cannot get away by claiming he did not know. Ignorance cannot be used as defence in any criminal case (Siegel 38). Works CitedHopt, J. K. and Teubner, G. Corporate Governance and Directors’ Liabilities: Legal, Economic and Sociological Analyses on Corporate Social Responsibility. London: Sage, 1985. Print.Siegel, J. B. A Desktop Guide for Non-profit Directors, Officers, and Directors.

New York: PULP, 2006. Print.Sorensen, A. Directors’ Liabilities in Case of Insolvency. New York: Free Press, 1999. Print.Webster, M. The Director’s Handbook: Your Duties, Responsibilities and Liabilities. Oxford: Oxford University Press, 2007. Print.