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Question
Justify the following statement:
Directors exercise their powers and authorities collectively as a Board.
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Solution
(i) Although the shareholders are the owners they cannot manage their company. Following the principle of democracy, they elect their representatives from amongst them, called the Directors, at the Annual General Meeting. They vest the Directors with the powers of managing the affairs of the company. Directors are the men of commercial skill and business tact. They are authorised by the shareholders to utilize the capital, acquire the assets, and appoint the personnel to conduct the affairs of the company for the benefit of the shareholders of the company.
(ii) The directors exercise their powers and take decisions collectively as a Board. They cannot exercise their powers and take decisions in their individual capacity. The Board of Directors is the policy-framing and decision-making organ of the company. As agents of the company, the directors must act within the scope of their authority and in the name of the principal, i.e. company. They would be personally liable if they take decisions in their own name and in their individual capacity. Their acts are not binding on the shareholders or on each other unless the Articles provide so.
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