Liabilities and Responsibilities of Non-Executive Directors in Law

This case study delves into the potential liabilities of Diana, a non-executive director at Boundless Technologies Ltd (BTL), focusing on her fiduciary duties and responsibilities within the board and audit committee. It addresses her obligations concerning confidential information, potential breaches ...Read More

Company Law
1

Table of Contents
Liabilities of Non-Executive Directors........................................................................................................3
Personal Responsibilities of Non-Executive Directors................................................................................3
Best deal with the practical difficulties that Diana might face within the board and the audit committee...4
References...................................................................................................................................................6
2

Liabilities of Non-Executive Directors
As a non-executive director, Diana is supposed to show a level of fiduciary duty and also require
caring Boundless Technologies Ltd exactly as executive directors do. She also requires analyzing
the performance of the management and making sure that constructively challenge the same
when it comes to the board meeting. Being a non-executive director she is independent of the
general management of the company and all associated parties. Diana has the same access to the
sensitive information of the company as all other directors have. In this case, she requires being
more careful and should maintain confidential information. As directors are responsible for the
primary management of the company, she is also responsible for her personal action towards the
business1. Like other directors, Diana will be held responsible for any loss occurs Boundless
Technologies Ltd due to breaches of her assigned duties. Additionally, she might require
illustrating that she has followed the appropriate steps and all required precautions to exercise
care, skill, and diligence regarding the execution of her roles and responsibilities.
Personal Responsibilities of Non-Executive Directors
The personal liability of a Diana might be brought up in both civil and criminal regarding her
omission or acts in the manner she has been directing the company. Diana has to follow all the
obligation of the company which has been signed by her under the job agreement. Any breach to
this agreement can be fined to Dian according to a summary conviction and also can be sent to
the prison for as long 6 months. She also needs to be careful were transactions are associated or
business contract concerning because she might be held negligent or may be personally liable for
1 Alan. Lowry Dignam, Company Law (Oxford Univ Press, 3rd ed, 2018).
3

business contract and transactions related to the third party2. Diana can be held liable for any of
the debts or liabilities of Boundless Technologies Ltd if she is known to the fraudulent party who
is carrying on the business.
Best deal with the practical difficulties that Diana might face within the board and the
audit committee
The non-executive directors should focus on board matters. The responsibility of the non-
executive director is to monitor the responsibilities of the executive directors and to act in the
interest of the stakeholders. The non-executive directors play the role of a creative contributor by
giving advice and objective criticism. There must be an independent judgment by the non-
executive directors regarding the standard of contract and key appointments3. The duty of
fiduciary is needs to be done at utmost good faith, confidence and trust. There was case of
Commonwealth Oil & Gas Company Limited v. Nicholas Wilson Baxter and Eurasia Energy
Limited that was held that the fiduciary duties of the non-executive directors are universal. The
non-executive directors have certain personal liabilities towards the company.
They are a liability to pay the tax of the company unless fraud is detected the director is not
responsible for any obligation of the organization. Unless fraud is detected the director is not
responsible for any contract entered by the organization and the director is responsible along
with the organization for refunding the excess part of application money. The director is liable to
be prosecuted if the cheque signed by him is dishonored under the negotiable instruments act.
The director is also liable to be prosecuted in case of any misstatement in the prospectus. The
non-executive directors are liable to maintain transparency with the board so that the board
2 Eilís Ferran, "Corporate Mobility And Company Law" (2016) 79(5) The Modern Law Review.
3 William Frederick Hamilton, Company Law (Gale, 4th ed, 2010).
4

acknowledges the integrity of the non-executive directors. The non-executive directors should
maintain honesty with the members of the board. Non-executive directors need to be polished
and professional in front of the board. The non-executive directors should be capable of spotting
the risk and plan accordingly to get out of the risk4.
4 John J Kirton and Jelena Madunic, Global Law (Ashgate, 6th ed, 2009).
5

References
Dignam, Alan. Lowry, Company Law (Oxford Univ Press, 3rd ed, 2018)
Ferran, Eilís, "Corporate Mobility And Company Law" (2016) 79(5) The Modern Law Review
Hamilton, William Frederick, Company Law (Gale, 4th ed, 2010)
Kirton, John J and Jelena Madunic, Global Law (Ashgate, 6th ed, 2009)
6