ABSTRACT
A company is a legal construct with certain identifiable characteristics such as a separate legal personality, limited liability and centralised management. These characteristics make the corporate form an attractive vehicle for the conduct of business; however they also create the foundations of the tensions which corporate law must address. The issue of a separate legal personality empowers a company to operate optimally on its own terms, but considering that a company is managed by humans, issues are raised as to accountability and responsibility for human actions and supposed corporate actions. Corporate law establishes and supports the separate legal personality principle, and the veil of incorporation is lifted only in particular circumstances in order to ascribe liability to the persons behind the veil. The limited liability principle and the incidence of centralised management leads to agency issues, which occur when the agents, in this case directors, are allowed to manage the company on behalf of the principals. Emerging from common law and enshrined in statutory regulation in some jurisdictions, one of the legal responses to these agency issues is the establishment of directors’ duties, aimed at ensuring that directors act in the best interests of the company, on behalf of shareholders. This chapter explores the duties of directors, their personal liabilities and the approach of corporate law in relation to these issues, with critical arguments presented as to the implications of these legal issues in relation to director effectiveness and corporate governance.
