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Relief from liabilities

A director is not personally liable under contracts which he enters into on behalf of the
company, provided that he was duly authorised to do so. In entering into such contracts,
directors are in the position of agents of the company. Like any other agent, they must
make it clear to the other party that they are not only directors but are acting in that
A court may relieve a director, either wholly or in part, from liability arising from
negligence, default, breach of duty or breach of trust, if it concludes that he
‘acted honestly and reasonably, and that having regard to all the circumstances of
the case (including those connected with his appointment) he ought fairly to be
excused’. This section does not apply to liability for wrongful trading.

Even though directors are responsible for the activities of the company, they are
only responsible for such liabilities if they

(a) Signed on behalf of the company, or purported to bind the company or

took action on behalf of the company despite knowing that the directors
lacked the authority to do so.
(b) Have been a party to an act or omission by the company despite knowing
that the act or omission was calculated to defraud the company.