A question that often arises is ‘what exactly are the powers of Directors and those of the Board of Directors’ within a company.
Well, the power that a board has is determined, and depends on, what is written within the Articles of the company. They can be as wide or as restricted as the company likes. With regards to the distribution of these powers, some rights and powers of the members are specifically defined within Companies Law, but others are defined within the Articles of the company. Between the board and the members of the company, they may exercise all the powers of the company.
The authority to exercise the company’s powers is delegated to the board as a whole and not to individual directors. Company law states that the ‘business of the company shall be managed by the directors’. This may be considered as all-embracing and effectively confers on the board all the powers of the company, except those required to be exercised by the members in general meeting in accordance with the Companies Law or the articles.
Members are not usually able to dictate to the board how the business of the company is to be managed; nor are the members able to overrule any intra vires decision come to by the directors in the exercise of their powers. Members who wish to exercise such control only do so by altering the articles within a general meeting.
Although vested in the board as a whole, if the articles of association provide, the powers of the directors may be sub-delegated by the board to the managing director, individual directors, or other officers of the company, or duly authorised third parties.
As previously noted, an act of the directors which may be ultra vires the directors but intra vires the company may, nevertheless, be ratified by the members in general meeting. This then validates the act of the directors. However, this cannot be utilized to repair acts which are in breach of the directors’ fiduciary duties, where the directors control the voting at a general meeting.
It sometimes happens that a board may be unable or unwilling to act. This may occur where the board members have fallen below the necessary number to constitute a quorum, or where the board members by virtue of their fiduciary duties are unable to act. In such a case, the members of the company in general meeting may resolve the situation by appointing any person to fill a casual vacancy or as an additional director.
If need be, this power may be exercised in conjunction with increasing the number of directors.