11.
Explanation
The statement “The powers of the director are co-extensive with those of the company itself” essentially means that the authority and powers of a director are as extensive as the powers of the company as a legal entity. While this statement reflects the general principle of the authority
of directors, it’s important to provide context and clarify a few key points:
1. Fiduciary Duties: Directors are agents of the company and, as such, owe a fiduciary duty to act in the best interests of the company and its shareholders. This means that their powers should be exercised for the benefit of the company as a whole and not for their personal
gain.
2. Company’s Constitution and Law: The extent of a director’s powers is defined by the company’s constitution (Memorandum and Articles of Association) and relevant corporate laws. Directors must operate within the boundaries set by these legal documents.
3. Delegation of Powers: While directors have significant authority, they can delegate certain powers to officers or committees within the company. This delegation is often outlined in the company’s Articles of Association. However, directors remain ultimately responsible for these delegated powers.
4. Shareholder Oversight: In many cases, significant company decisions, such as changes to the company’s constitution or major transactions, require approval from the shareholders. Directors must act in accordance with shareholder resolutions.
5. Limitation of Authority: The directors’ authority is not unlimited. Certain decisions, such as amending the company’s constitution or winding up the company, often require specific procedures and shareholder approval.
6. Liability: If directors act outside the scope of their authority or breach their fiduciary duties, they can be held personally liable for the consequences of their actions.
In summary, while directors have significant powers to manage and make decisions on behalf of the company, these powers are not absolute. They are subject to legal, constitutional, and fiduciary constraints. Directors must act in the best interests of the company, adhere to the company’s constitution and the law, and consider the rights and interests of shareholders. The principle that their powers are co-extensive with the company means that they have the authority to manage the company’s affairs, but it comes with a responsibility to act prudently and ethically.