Directors who are appointed to a company at incorporation, or at any other time during
the life of the company, are appointed to oversee, and in some cases, manage the
affairs of the company. This does not mean, however, that directors have carte blanche
authority to enter into transactions and run the company in any way they feel
appropriate.
Too often, this writer has seen situations where a director has entered into a transaction,
binding a company, and the only person who knows about the deal is that director. In
such circumstances, there were no meetings to consider the transaction, no resolutions
authorising the deal; nothing but the director’s signature on the transaction documents.
Such actions make for bad business practice, and often contravene the Companies Act
of Jamaica, and the company’s Articles of Incorporation (the “Articles”).
In this article, I will share a few short words to the wise director.
Directors’ meetings
When managing a company, inevitably, there will be decisions that will need to be taken.
Certain day-to-day transactions will not require the directors to meet to consider the
matter, but certain decisions will rise to the level of requiring a directors’ meeting. These
include, for example, decisions that will bind the company to some financial obligation
such as a loan, decisions on issuing shares to potential shareholders, and decisions on
transfers of the company’s shares. Where any such actions are being contemplated, it is
imperative that the directors hold a meeting to give consideration to the transactions.
Directors’ meetings are called and held in accordance with the Articles of the company.
The Articles will set out matters such as the notice period for calling the meeting,
methodology for waiving notice of a meeting, the quorum for the meeting, voting, and
the mechanism for declaration of any potential conflicts of interest. All decisions taken at
directors’ meetings are to be recorded, and this is to be done, even where the company
has a sole director.
Resolutions and minutes
Coming out of a meeting of the directors, any decisions taken are to be recorded in the
minutes of the meeting. These decisions, which are usually stated as “resolutions”, and
which are noted in the minutes, provide evidence (on their face) of what the directors
considered, and what was decided. Using the issuance of shares as an illustration, the
resolutions may state something to the effect that the company approves the allotment
and issue of the shares to the new shareholder.
The resolutions may also provide other directions, such as a direction for the secretary
of the company to update the company’s registers, make any necessary filings with the
Companies Office of Jamaica (“COJ”), and prepare certain documents, such as, using
the example above, the new share certificate(s) to the new shareholder.
It is important for directors to ensure that where any decisions are being taken that will
bind the company to certain obligations, particularly, financial and service obligations,
there is concrete proof that the matter was considered, and, where the transaction is to
proceed, that the directors passed the appropriate resolutions authorising the company
to enter the transaction and be so bound.
It is also important that directors note that for certain types of matters, their authorisation
will not suffice, but, the authorisation of the shareholders of the company will be
required. In such cases, the directors must ensure that any relevant meetings are
properly called, and held, for the shareholders to consider the matters, and again, that
the goings-on of the meetings are recorded, as well as any resolutions passed by the
shareholders.
- 1. Acting honestly, in good faith, and in the best interests of the company;
- 2. Considering the best interests of shareholders in making decisions;
- 3. Ensuring the company’s filings are up-to-date, including tax and COJ filings;
- 4. Avoiding conflicts of interest, by disclosing them when and where appropriate;
- 5. Convening annual general meetings and /or extraordinary general meetings of
the company; - 6. Attending directors’ meetings; and
- 7. Executing documents on behalf of the company to give effect to transactions to
be entered into by the company.
Directors’ duties
Directors owe certain duties to the company, including fiduciary ones, which is why it is
critical for directors to dot all the “I”s and cross all the “T”s in relation to decisions taken
by them. Directors should take note of the duties that are owed to the company to
ensure that they are compliant, and not opening themselves up to the liabilities that
follow from failing to perform. Ignorance of these duties will not stave off liability, so a
wise director will seek to know just what they are expected to do when they accept a
directorship. Some directors’ duties (by no means exhaustive) include:
It is surely better to be wise than foolish, particularly as a director of a company, being
tasked with its oversight and management. Wisdom may be found in understanding
exactly what is required of the position, and ensuring that all the proper steps are being
taken. This should be a foremost consideration because when it comes to transactions
with companies, where the stakes are high, as well as the potential exposure, a director
without sure footing, may just slip, and may just slide.
Lisa Rhooms is the Managing Partner at Grant, Henry & Rhooms, and the head of the firm’s Commercial Law Department. She may be contacted at lisa@ghrlegal.com or www.ghrlegal.com. This article is for general information purposes only and does not constitute legal advice. Should you wish to seek legal advice, you may schedule a free consultation with our offices.
