Report on Multi-Unit Developments - Law Reform Commission

that the person should take reasonable steps to place themselves in a position
to bring an informed and independent judgment to bear on decision-making. 78
Directors may also face liability personally where they perform their duties
negligently. 79
3.85 It is clear that one reason why owners‘ management companies fail
to comply with company law is because some directors do not fulfil their
fiduciary duties as directors with due diligence. Some individuals may not have
appreciated the legal effect of holding a directorship of an owners‘ management
company, that it is seen as a title rather than a role with responsibilities.
3.86 One approach to failure by a director to fulfil his or her duties is to
enforce the company law code to its full extent. Thus, the Office of the Director
of Corporate Enforcement is empowered, in certain situations, to seek a
disqualification order against a person who is a director of a company at the
time a process of strike-off is commenced where the process ends with the
company actually being struck off. 80 This has a profound effect where the
director in question also holds directorship of other companies in a professional
capacity. 81 It is thus obvious that the threat of ODCE action may have some
effect insofar as it may affect directors who are also directors of other
companies.
3.87 Alternatively and or additionally, where a director is negligent in
performing his or her duties, a company has the option of enforcing financial
liability against him or her. 82 This was underlined in the ODCE‘s Draft
Guidance:
―We think it at least conceivable that the directors and secretary who
allowed the company to become struck-off could be required to
reimburse a company for costs, expenses and damages which arose
as a result of the strike-off. Section 383(3) of the Companies Act
1963 provides that it is the duty of each director and secretary of a
78
AWA Ltd.. v. Daniels (1992) 7 ASCR 759 at 864-865.
79
See Courtney, paragraph 10.064 where he observes that directors may incur
tortious liability for negligent behaviour where not under indemnity of the type
envisaged by the Companies Act 1963, Sch 1, Table A, Part I, model reg 138.
80
Companies Act 1990, s. 160(3A).
81
This may often particularly be the case where developers are still in control of the
management company.
82
See Keane, paragraphs 27.127-27.129.
85