Multiple directorships refer to the situations that an individual simultaneously holding multiple positions as company directors. In view of this, some critics think that the more complex the legal duties owed by a director to different corporations, the higher the risk of collision between the director’s duties and his business interests. As discussed herein, these directors should carefully consider the scope of fiduciary duties and the duties of care and skills that they owe to each corporation prior to making any business decisions. This paper is trying to investigate the problems that could possibly arise from multiple directorships and to examine the legal implications that given rise from those problems.
To begin with, one notable problem at stack is under what circumstances do multiple directorships constitute a breach of fiduciary duty or present a conflict of interest. From a legal perspective, an individual acting in a multiple capacity as directors of more than one corporation owes a fiduciary duty to each corporation. Such fiduciary duties comprise that a director must act bona fide for the benefit of the company and exercise his power for proper purpose. Also, a director must not allow any conflict between his personal interest and his duty as director. In general, there is no interdiction against a director serving on the boards of two or even more corporations. The matter of multiple directorships in turns becomes improper when a director fails in his fiduciary duties to a corporation.
One conflicting situation associated with multiple directorships is the usurpation of corporate opportunity. Take the case of Guth v. Loft, Inc. (1939) as for instance. Without making a full disclosure to the board that a corporate opportunity exists, instead a director pursued the business advantage on behalf of another corporation. In such a case, the director would be alleged to have breached his fiduciary duty by failing to offer that...
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