COMPANY LAW IN GHANA- DUTIES OF DIRECTORS ( PART 2)

DUTIES OF DIRECTORS – Part 2 This lecture examines the legal framework governing directors’ duties under the Companies Act, 2019 (Act 992). At the core of Ghanaian company law is the principle that directors are fiduciaries of the company. Section 190(1) provides that a director stands in a fiduciary relationship and must act in utmost good faith. This reflects long-established equitable principles seen in cases such as Aberdeen Railway Co v Blaikie Brothers and *Regal (Hastings) Ltd v Gulliver*. Directors’ duties may be broadly classified into fiduciary duties, duties of care and skill, and statutory duties. Fiduciary duties emphasise loyalty, while care duties focus on competence and diligence. The duty of utmost good faith is foundational. It requires honesty, loyalty, and avoidance of bad faith. A director must not act for personal benefit, pursue improper purposes, or conceal material information. The duty is strict: liability may arise even where the director acts honestly and the company suffers no loss. It operates as the umbrella duty from which other obligations derive. Closely related is the duty to act in the best interest of the company under section 190(2). This duty has both subjective and objective elements. Directors must act in what they honestly believe to be in the company’s interest, but also meet the standard of a faithful, diligent, and ordinarily skilful director. The phrase “company as a whole” refers to the corporate entity, not individual shareholders. Modern Ghanaian law adopts a broader approach by requiring consideration of long-term consequences, environmental impact, and corporate reputation. The duty to exercise independent judgment under section 190(5) ensures that directors act as decision-makers, not mere agents. A director must apply his own mind and cannot blindly follow instructions from shareholders, political authorities, or dominant figures. While reliance on professional advice is permissible, it must not amount to abdication of judgment. The duty of care, skill, and diligence reflects a hybrid standard combining objective and subjective elements. Directors must act with reasonable care expected of a prudent person and also meet the higher standard of any special expertise they possess. Modern authority rejects passivity: directors must actively supervise, inform themselves, and participate in decision-making. Another critical duty is to act within powers and for proper purposes (sections 190(3) and 191). Even where directors act in good faith, their actions will be invalid if exercised for improper purposes. The courts apply the “primary purpose test” to determine whether a power has been misused, particularly in cases involving share allotment and control of the company. The duty to avoid conflicts of interest is strictly enforced under sections 192–196. Directors must not place themselves in situations where personal interest conflicts with duty. This includes exploiting corporate opportunities, engaging in competing businesses, or entering into undisclosed transactions. The rule is prophylactic: it prevents even the possibility of conflict. Disclosure is the key mechanism that allows certain conflicts to be authorised. Section 195 requires full and timely disclosure of any interest. Failure to disclose renders transactions voidable and exposes the director to liability. Transparency is reinforced through the statutory requirement of an interests register. Directors are also prohibited from making secret profits and must not compete with the company. Any profit obtained in breach of duty is held on constructive trust for the company. The law provides robust enforcement mechanisms. Under section 199, remedies include compensation, account of profits, and rescission of transactions. Actions may be brought by the company or by shareholders through derivative proceedings. Directors may also incur joint and several liability and, in some cases, regulatory sanctions. In conclusion, the regime under Act 992 represents a comprehensive codification of fiduciary and common law principles. It emphasises loyalty, accountability, transparency, and responsible corporate governance. Directors are not merely managers; they are trustees of corporate power, and the law demands that such power be exercised with integrity, diligence, and fidelity to the company’s interest.