What legal duties do company directors have in Trinidad and Tobago?

The two core duties

Under the Companies Act (Chapter 81:01), every director and officer must (s 99(1)):

1. "act honestly and in good faith with a view to the best interests of the company"; and
2. "exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances".

In deciding what is in the company's best interests, a director "shall have regard to the interests of the company's employees in general as well as to the interests of its shareholders". The duty to have regard to employees' interests is owed "to the company alone" (s 99(2), (3)).

Directors must also comply with the Act, the Regulations, the articles, the by-laws and any unanimous shareholder agreement (s 99(5)). They must not disclose information about the company's affairs except for their work as directors, legal proceedings, a legal requirement or with the company's authority (s 99(4)).

Conflicts of interest

A director who is a party to a material contract or proposed contract with the company, or who is a director or officer of, or has a material interest in, a party to one, must disclose "the nature and extent of his interest" in writing, or ask for it to be entered in the minutes of directors' meetings (s 93(1)). The disclosure is made at the meeting where the contract is first considered or, if the interest arises later, at the next meeting (s 93(2)).

The director must not be present, count towards the quorum or vote on approving the contract. Limited exceptions include a contract mainly about his own pay (s 93(5)).

A disclosed contract that the directors or shareholders approved, and that was reasonable and fair to the company when approved, is not void or voidable only because of the interest (s 95). If the director did not disclose, the court may set the contract aside on the application of the company or a shareholder (s 96).

Defences

• Recording dissent. A director at a meeting is deemed to consent to what is passed unless his dissent is minuted or sent in writing as s 100(1) requires. An absent director is presumed to consent unless he records or sends his dissent within 21 days of learning of the resolution (s 100(3)).
• Reliance. A director is not liable under ss 87, 88 or 99 if he relied in good faith on the company's financial statements as represented by an officer, or on a report of an attorney-at-law, accountant, engineer, appraiser or other professional (s 100(4)).
• Court relief. If a director acted honestly and reasonably and ought fairly to be excused, the court may relieve him wholly or partly from liability for negligence, default, breach of duty or breach of trust (s 523).

No provision in a contract, the articles, the by-laws or a resolution relieves a director of the duty to comply with the Act or of liability for breaching it (s 99(6)). A unanimous shareholder agreement does not excuse breaches. To the extent it restricts the directors' powers, the directors are relieved of the matching duties and liabilities, and the shareholders who are parties take them on (s 137(2)).

Personal liability under the Act

Directors who vote for or consent to a resolution authorising any of the following are jointly and severally liable to repay the company what was paid out and not recovered (s 88):

• buying back or redeeming shares contrary to ss 43 to 45;
• a dividend contrary to ss 54 and 55, for example while there are reasonable grounds for believing the company cannot pay its liabilities as they fall due;
• financial assistance contrary to s 56;
• an indemnity paid contrary to ss 227 to 236 or s 242.

A claim to enforce this liability must be started within 2 years of the resolution (s 92). In a winding up, the court can also make directors knowingly party to fraudulent or reckless trading personally responsible for the company's debts, as far as it directs (ss 443(4), 447).

Who can enforce the duties

The company itself can sue. A "complainant" (a present or former shareholder, debenture holder, director or officer, the Registrar, or anyone the court considers proper) can also go to court (s 239):

• for leave to sue in the company's name, if the directors had reasonable notice, the complainant acts in good faith and the claim appears to be in the company's interests (s 240);
• for relief from conduct that is oppressive or unfairly prejudicial to, or unfairly disregards the interests of, a shareholder, debenture holder, creditor, director or officer (s 242);
• for an order that a director comply with the Act, the articles, the by-laws or a unanimous shareholder agreement, which a creditor may also seek (s 249).