MANAGEMENT

AND
ADMINISTRATION
OF THE COMPANY
Abdulmajid Mtukusye
Tutorial Assistant Lecturer At TUDARCO
 Introduction
The word company has no strictly technical or legal
meaning It may be described to imply an association
of persons for some common object or object. The
purposes for which people may associate
themselves are multifarious and include economic
as well as non-economic objectives.
(Re Stanley [1906] 1 Ch. 131). Defined a company
to mean a legal entity formed by a group of
individuals to engage in and operate a business
enterprise in a commercial or industrial capacity for
the purposes of gaining profit.
Introduction…..
The case of Salomon v Salomon & Co.[1897] AC 22
laid down the principle of corporate personality
which simply means that a company personality
really exists apart and different from its owners. As
a result of this, a company can sue and be sued in
its own name, have responsibility and rights, hold
its own property and crucially be liable for its own
debts also a company has a separate management
which controls and regulate the day-to-day
activities of a company.
Management of a company
Company management refers to the process of
controlling and governing the business and affairs
of a Company in order to meet its internal
objectives and external responsibilities.
Management includes planning, organizing,
staffing, leading or directing, and controlling an
organization to accomplish the goal. Resourcing
encompasses the deployment and manipulation of
human resources, financial resources, technological
resources, and natural resources
Management…..
Since a company is an artificial legal person it can
not operate on its own simply because the company
has no mind(brain). Therefore it needs individuals
who can act for it, represent it, and make decisions
concerning how it is to be run. These individuals are
the directors, who are officers of the company.
Each registered company must have provisions in its
MEMART which provides for the powers and
management of a company’s affairs. It must indicate
who has the authority to manage the company
affairs and to what extent. Eg. Rule 71 Prt 1 of the
CA
 Who is a director?
The Companies Act under the interpretation
section defines a Director to mean
◦ “Director includes any person occupying the position
of director by whatever name called”
This definition is not exhaustive in providing a
meaning of what is a director as far as company law is
concerned due to the fact that it does not specify
what position a person must occupy to be referred to
as a director.
Who is a director…
What about case laws?
Furguson v Wilson (1866)
Cairns L. J. observed that
◦ “The company itself cannot act in its own person,
for it has no brain; it can only act through
directors, and the case is, as regards those
directors, merely the ordinary case of principal
and agent”
Who is a director…
Aberdeen Railway Co v Blaikie Brothers (1854)
Lord Cranwort L.C. observed that
◦ “The directors are a body to whom is delegated
the duty of managing the general affairs of the
company. A corporate body can only act by
agents, and it is of course the duty of those
agents so to act as best to promote the interests
of the corporation whose affairs they are
conducting”.
Who is a director…
Re forest of Dean Mining Company(1878) 10 chD 450
Jessel MR said
◦ “It does not much matter what you call them so long
as you understand what their real position is, which
is that they are really commercial men managing a
trading concern for the benefit of themselves and
shareholders in it”
In a nutshell, the persons who are in-charge of the
management of the affairs of the company are termed
as directors. They are collectively known as the Board
of Directors.
 What is a position of director
As we have discussed before that a company cannot
operate by its own without having directors of a
company who will perform different duties on behalf
of the company. Here you should ask yourself what
relationship subsists between a director and a
company. Do they have any connection with a
company and its members(shareholders)?
Here we find two positions of director in relation to
company affairs which are; director as and agent and
director as a trustee of a company
As an Agent of a company
Directors are considered to be an agent of a
company because they perform different activities
on behalf of the company. Since the company is an
artificial person in the eyes of law then it cannot
operate on its own such as making decisions,
conducting meeting, entering Into different
contractual transactions, etc without having a
brain. Therefore they are appointed as
representatives of a company’s affairs and their
relationship is of principal-agent relationship
As an Agent……
Do you remember this case?
Furguson v Wilson (1866)
Cairns L. J. observed that
◦ “The company itself cannot act in its own person,
for it has no brain; it can only act through
directors, and the case is, as regards those
directors, merely the ordinary case of principal
and agent”
As an Agent……
in case of Faure Electric Accuinuolator Co., (1888)
40 Ch. D. 147)
It was held
◦ “Directors are agents for the company with powers
and duties of carrying on the whole of its business
subject to the restrictions imposed by the articles and
the statutory provisions. Their role as agent is guided
by the powers and duties entrusted to them.
Authority to act as an agent
A director derives his authority to act as agent of
the Company by virtue of its Articles of Association
which are drafted in accordance with provisions of
the Companies Act. Thus, his actions as an agent
are considered as “actions of the Company” itself.
However, the director is not held personally liable
for his acts unless specifically provided in the law.
Wherever a liability would attract to an agent;
directors would be held liable whereas where the
liability would attract to the principal, the burden
of liability will be shifted to the company.
Authority to act as an agent
Under the law of agency, it requires that an agent
shall not perform anything on behalf of his
principal without being authorized to do the same.
This position doesn’t restrict a director of the
company to act independently without making any
consultation with the shareholders of a company
so long as he exercises his powers for the interest
of the company and not otherwise.
The law of Agency is regulated by the Law of
Contract Act [Cap 345 R:E 2019]
Director As a Trustee
The office of the director is fiduciary in nature and
powers are delegated to them to act on behalf of
the Company. Directors are often referred as
“trustees of the company”. They are treated as
trustees of the Company with regards to the money
and the property of the company they handle. They
undertake all the transactions on behalf of the
company and utilize the company’s funds in the
best possible manner to gain profits.
Director As a Trustee….
The directors are also the trustees in respect of
powers entrusted to them. They must exercise
these powers bonafide and for the overall benefit
of the company. They have the power to utilize the
funds of the company, to declare dividends in the
general meeting, to make calls and even to forfeit
shares, to approve the transfer of shares, and
accept the surrender of shares. They exercise their
powers which are basically “powers in trust” in
good faith and for the benefit of the Company
Director As a Trustee….
Eastern Railway Co. v Itein it was
stated that; (1872) LR & CH APP 149
In this case, it was held that
“Directors are mere trustees or agents of
the company that the trustees of
company‘s money and properly and agent
in the transaction they enter on to on
behalf of Company”.
Appointment of Company Directors
Directors are appointed by shareholders at the
annual general meeting and must upon
appointment, sign and deliver for registration at
the Companies Registry consent in writing to act as
directors. In case of the public company must
comply with the provisions of section 192 of CO
Required Documents
The appointed director must fill out form No. 210(a)
of the Companies (Forms) Rules and deliver the same
to the RCO which shall be accompanied by the
company’s resolutions and a copy of the minutes of
the AGM or whatever meeting which was called for
the appointment of the same
What is the required
number of directors?
Section 186 of the Act as amended by The
Business Laws (Miscellaneous Amendments) Act
of 2011 stipulates for every company to have at
least two directors, except for a limited liability
single shareholder company which shall have one
director."
The Companies Act is silent about the maximum
number of directors but each company may decide
to stipulate the maximum number of its own
directors in the MEMART of a particular company
Qualification of director
He should be of the age of majority. The one who
wants to be appointed as director must comply
with provisions of section 194 of CO such as not
below 21 years and not exceeding 70 years. This
section was later on amended by Act No 3 of 2021
which provides the required age to be 18 years and
above
He must be of sound mind. That is to say at the
time of the appointment it must be proved that he
is not suffering from any mental problems
Qualification….
Must not be disqualified by any law to which
he/she is subject
Must not be disqualified by any other order of
the court as per section 196 Companies Act
Must not have been convicted for any criminal
offense which relates to fraud s.197 Companies Act
if the articles so require, the director must have
share qualification. S.191(1) Companies Act
Types of directors
There are various types of directors under
company law including but not limited to
Shadow Director
Alternate Directors
De Facto Directors
Executive Directors
Resident director
Woman director
Shadow Director
A shadow director is a person who does not hold
an official position as a director of a company, but
who nevertheless exercises control over the
company's affairs or who is accustomed to be
consulted by the company's directors on matters of
business. In other words, a shadow director is
someone who influences or directs the actions of a
company, even though they do not hold an official
director position.
Alternate Directors
An alternate director is a person who is appointed
by a company's board of directors to attend
meetings and act on behalf of a regular director
when that director is unable to attend. The
alternate director is usually appointed from among
the company's senior executives or other
individuals who have a good understanding of the
company's operations and business strategy.
Alternate Directors…
The role of an alternate director is to represent the
interests of the absent director and to ensure that
the board's decisions are made in the best interests
of the company. In some cases, an alternate
director may also be given the authority to make
decisions on behalf of the absent director, although
this will depend on the specific terms of their
appointment. It is important to note that an
alternate director is not a separate member of the
board of directors and does not have voting rights
in their own capacity
De Facto Directors
A de facto director is a person who acts as a director
of a company, even though they have not been
formally appointed or elected as a director. This can
occur in situations where someone assumes the role
of a director without going through the proper legal
procedures, or where a person is appointed as a
director but their appointment is not valid for some
reason.
De Facto Directors
A de facto director may have the same
responsibilities and duties as a formally appointed
director, including a duty to act in the best interests
of the company and its shareholders, to exercise
reasonable care and skill, and to avoid conflicts of
interest.
They may also be held liable for any breaches of
these duties, just like a formally appointed director
Executive Directors
Are directors concerned with the actual
management of the company, They are involved in
the day-to-day management of the Company. They
are engaged by the company to work on full-time
basis. Generally, he must have a contract with the
company that gives him the position
Duties of directors
Duty of directors is to act in good faith and in the
best interests of the company (S.182).Re Smith and
Fawcett Ltd, 360 per Lord Greene MR it was held
that
“the directors were required to act “bona fide in that
they consider not what a court may consider is in the
interests of the company, and not for any collateral
purpose”.
Since a director is an agent of a company then he
must ensure that he safeguards the interest of a
company and not of his own.
Duties of directors
Directors to have regard for the interest of
employees. Section 183 (1) of the Act imposes
fiduciary duty towards directors while performing
their duties they have to act in the matters to
which the paramount consideration is the interests
of the members as well as the interests of the
company's employees
Duties of directors
Duty to act for proper purposes( s.184). Any action of
the director must be reasonable and for the benefit of
the company whereby under that circumstances any
reasonable person could do. The motive of such action
must be reasonable. Bishops Gate Investment
Management Ltd v Maxwell. it was held
“if a director chooses to participate in the management of
the company and exercises powers on its behalf, he owes a
duty to act bona fide in the interests of the company. He
must exercise the power solely for the purpose for which it
was conferred…”.
Duties of directors….
Duty to declare the interest in the
company(s.209). A major aspect of a director’s
fiduciary duty is that he must not let his duty to the
company come into conflict with his personal
interests. Therefore, a transaction that a director
makes on behalf of the company from which he
derives a personal benefit is voidable and can be
set aside at the option of the company
See Aberdeen Rly Co v Blaikie Bros
 Duties of directors….
Lord Cranworth LC stated the rule thus:
“A corporate body can only act by agents, and it is of
course the duty of those agents so to act as best to
promote the interests of the corporation whose affairs
they are conducting. Such agents have duties to
discharge of a fiduciary nature towards their principal.
And it is a rule of universal application, that no one,
having such duties to discharge, shall be allowed to
enter into engagements in which he has, or can have,
a personal interest conflicting with the interests of
those whom he is bound to protect”
Duties of directors….
Duties to creditors
in Walker v Wimborne
It was held that
“... the directors of a company in discharging their
duty to the company must take account of the
interest of its shareholders and its creditors. Any
failure by the directors to take into account the
interests of creditors will have adverse
consequences for the company as well as for them”
Liability of director
 Fraudulent trading (s.383)
 Wrongful trading (s.384 CA)
Disqualification order (s. 197)
Criminal liability (s.314 Penal Code
 Breach of fiduciary duty
Ultra vires act
 Misstatement (see Derry v Peak)
Removal of director
Regulation 83 Table A Part 1 The office of
director shall be vacated if the director-
(a) ceases to be a director by virtue of any
provision of the Act or he becomes prohibited
by law from being a director; or
(b) becomes bankrupt or makes any
arrangement or composition with his creditors
generally; or
(c) becomes of unsound mind; or
.
Removal of director
(d)resigns his office by notice in writing to the
company; or
(e) shall for more than six consecutive months
have been absent without permission of the
directors from meetings of the directors held
during that period and the directors resolve that
his office be vacated