Directors and their duties

1. Who manages the company?

Tamarind Advisory Ltd is the same private company as in the last chapter. Meera holds 60 of the 100 ordinary shares and Ravi holds 40. Both are directors. Meera lives and works in Mauritius. Ravi also lives in Mauritius. The company has no constitution. On the figures used for the annual return, its last turnover was Rs 80 million, so it is a small private company.

The board is the directors acting together. It manages the company’s business, or directs and supervises that management, and it has the powers needed for that task, subject to the Act and any constitution (section 129). Owning shares does not, by itself, put a person on the board.

Suppose Ravi resigns as a director and keeps his 40 shares. He can still vote as a shareholder, receive a dividend that has been properly authorised, and share in surplus assets. He no longer takes part in board decisions. Meera can be left as the only director. A person can also be appointed as a director without owning any shares. The two roles often sit in the same people at Tamarind. They are still different roles, and the duties in the next section attach to the director role.

A person the board is accustomed to obey

For the duty sections, “director” is wider than the name on the register of directors (section 128). It includes a person whose instructions a director, or the board, is accustomed to follow. It includes a person who exercises the board’s powers. It includes someone to whom the board has delegated a power, once that person accepts it. A professional adviser who is acting only in that professional capacity is not brought in by the instruction test.

Meera’s father, Dev, holds no shares and has never been appointed. If Meera treats his instructions as the decisions of the board, as a matter of course, Dev is treated as a director for those duty sections. If she takes his view once, as advice, and then decides for herself, that single conversation does not make him a director.

Who may be a director

Every company must have at least one director who is ordinarily resident in Mauritius: living here in the ordinary course, not visiting (section 132). A director of an ordinary company is a natural person, must consent in writing, and must certify that he or she is not disqualified (sections 133 and 134). Disqualification includes being under 18, an undischarged bankruptcy, having been adjudged of unsound mind, and the prohibition orders in sections 337 and 338.

At Tamarind, Meera satisfies the residence rule. If she moved abroad and Ravi had already resigned, the company would have no director ordinarily resident in Mauritius. Ravi’s shares would not fill that seat.

A public company has further board rules. There must be at least one woman on the board. A public company whose shares are listed must have at least 25 per cent women on the board. The board must include at least two independent directors (section 133). An independent director has to meet the Act’s tests about relationships with the company and its management. Calling Meera “independent” would not make her so while she is an executive director running the business. A woman who does meet the independence tests can fill both an independent seat and the requirement for a woman. Tamarind is private, so these public-company numbers do not apply to it. The residence rule for an Authorised Company is in the global-business chapter.

The board may delegate a power to a committee of directors, to one director, to an employee, or to another person, except the powers reserved by the Seventh Schedule (section 131). Those reserved powers include issuing shares, authorising a distribution, buying or redeeming the company’s own shares, giving financial assistance, changing the registered office, and approving an amalgamation. Where the board does delegate, it remains responsible for the exercise of the power as if it had exercised the power itself, unless it believed on reasonable grounds that the delegate would comply with the directors’ duties and it monitored the delegate by reasonable methods properly used.

Companies Act, sections 128, 129, 131, 132, 133, 134, 337 and 338. Seventh Schedule. CBRD text, 15 May 2026.

2. What a director must do

Section 143 sets out what directors must do. They must exercise their powers in accordance with the Act and the constitution. They must obtain shareholder authorisation where the Act or the constitution requires it. They must act honestly, in good faith, in the best interests of the company, and for the purposes for which the powers were given. They must meet the care standard in section 160. They must not agree to an obligation unless they believe, on reasonable grounds, that the company will be able to perform it when it falls due. They must account to the company for a gain obtained from the office, other than remuneration dealt with under the Act. They must not misuse confidential information, compete with the company without the required approval, hide an interest in a transaction the company is entering, or use company assets for a purpose outside the ordinary business. They must attend board meetings with reasonable regularity, keep accounting records, and not act in a way that is oppressive, unfairly discriminatory or unfairly prejudicial to shareholders.

Those duties are owed to the company (section 143). A shareholder or a debenture holder may still apply to the Court for a declaration that an act is a breach, or for an injunction to stop a proposed breach.

One authorisation the board must obtain is for a major transaction. The board must not enter an acquisition, a disposition or a commitment whose value is more than 75 per cent of the company’s assets before the transaction, unless the shareholders have approved it by special resolution or the transaction is conditional on that approval (section 130). A transaction of the same kind worth more than half the assets, and not more than 75 per cent, needs an ordinary resolution. The decisions chapter counts Meera’s 60 votes on Tamarind’s workshop and its equipment, on a show of hands and on a poll. This chapter is the directors’ duty to get that authorisation before they bind the company.

At Tamarind, Meera wants the company to hire her sister’s firm at a fee well above the quotes from two other firms, because the sister needs the work. The duty is owed to Tamarind. Meera is interested in the hire. She must disclose that interest to the board forthwith, with its nature and extent, because the fee is not on usual terms in the ordinary course of business (section 148). Tamarind is a private company, so once she has disclosed, she may vote on the hire and she still counts towards the quorum (section 152). A director of a public company in the same position must not have that vote counted.

If Meera takes a secret commission on the hire, she accounts for it to the company. If she opens a competing consultancy, that competition needs the company’s approval after full disclosure of the material facts (section 146). The approval is a written resolution signed by three quarters of the members entitled to attend and vote, or an ordinary resolution at a meeting in which her own votes, and the votes on shares in which she is beneficially interested, are not counted. An approval given after the event has to be signed or passed within 15 months.

When the best interests of another company may be considered

A director of a wholly-owned subsidiary may act in what he or she believes are the holding company’s interests, even where that is not in the subsidiary’s own interests, if the subsidiary’s constitution expressly permits it. A subsidiary that is not wholly owned needs that permission and the prior agreement of the shareholders other than the holding company. A company incorporated for a joint venture between the shareholders may, if the constitution expressly permits it, allow a director to act in a shareholder’s interests in carrying out the joint venture. Tamarind is not a subsidiary and not a joint-venture company, so these permissions do not apply to Meera’s decision.

Companies Act, section 143.

Companies Act, sections 130, 143, 146, 148 and 152.

3. How a board decision is taken

The ways the board can meet, the two-director quorum, and the difference between a board paper and a shareholders’ paper are in the decisions chapter. For the duties in this chapter, a hire the board has not validly decided is not a board decision. Meera must attend board meetings with reasonable regularity.

Tamarind has two directors and has not fixed a quorum. A majority of two is both of them. The sister’s firm is not hired at a meeting only Meera attends, and Meera’s signature alone is not a written resolution of the board. If both attend and Ravi says nothing, he is presumed to have voted in favour. If he votes against, the votes are one and one. The chairperson has no casting vote, so that resolution does not pass.

Companies Act, section 158. Eighth Schedule. The count is worked in the decisions chapter.

4. When a director fails

A director who fails to comply with the duties in section 143 commits an offence. On conviction the penalty is a fine not exceeding Rs 100,000 and imprisonment for a term not exceeding 12 months. A director who fails to disclose an interest under section 148 commits a separate offence, with a fine not exceeding Rs 100,000 and imprisonment for a term not exceeding one year. Failure to disclose does not, by itself, make the contract void. The company may avoid a transaction in which a director is interested at any time before six months after the transaction is disclosed to all the shareholders, unless the company received fair value. Fair value is judged on the information known to the company and to the interested director when the transaction was made. A transaction in the ordinary course and on usual terms is presumed to be at fair value. Meera’s sister’s fee, set well above the other quotes, does not have that presumption.

Where an officer breaches a duty under this Part, that officer, and every person who knowingly took part, must compensate the company for the loss. The officer must account to the company for the profit. The company may rescind a contract between the officer and the company (section 160).

A director who believes the company cannot pay its debts as they fall due must forthwith call a board meeting to consider a liquidator, an administrator, or carrying on the business (section 162). If the director does not call it, the company was at that time unable to pay its debts as they fell due, and the company is later placed in liquidation, the Court may order that director to meet all or part of the loss creditors suffer because the company kept trading. The applicant is the liquidator or a creditor. The section does not apply during a period that has been prescribed for that purpose. This example takes the duty as applying, which is the result whenever no such period is in force. If the meeting is called and there were no reasonable grounds to believe the company could pay its debts, the same order can reach the directors who did not attend and vote to appoint a liquidator or an administrator. The later chapter follows the shareholders’ resolution to liquidate and removal from the register.

Removing Meera from the board

Shareholders of a private company may remove a director by special resolution, at a meeting called for a purpose that includes the removal, and the notice must say that this is the purpose (section 138). The constitution and any agreement with the director do not block that vote. If both of Tamarind’s shareholders vote on a poll, Meera’s 60 votes are 60 per cent of the votes cast. The decisions chapter is where that percentage is counted, including the show of hands on which each shareholder has one vote. Sixty per cent is below 75 per cent, so a resolution to remove Ravi fails if he votes against it, and a resolution to remove Meera fails if she votes against it.

A public company removes a director by ordinary resolution at a meeting called for that purpose. The office of a director of a public company, or of a subsidiary of a public company, becomes vacant at the end of the annual meeting that follows the director’s 70th birthday. Tamarind is a private company and it is not a subsidiary of a public company, so that age rule does not vacate Meera’s office.

Companies Act, sections 138, 143, 148, 149, 160 and 162.

5. What can protect a director

The care standard is the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances, exercised honestly, in good faith and in the company’s best interests (section 160). An executive director of a public company is measured against a reasonably prudent and competent executive in that position.

A business judgment meets that standard where it is made in good faith for a proper purpose, the director has no material personal interest in the matter, the company is informed to the extent the director reasonably believes appropriate, and the director reasonably believes the judgment is in the company’s best interests. A business judgment is a decision to take or not take action on a matter relevant to the business. Meera’s personal interest in her sister’s firm is a material personal interest. The business-judgment protection does not apply to that hire.

A director may rely on reports, statements, financial data and advice from an employee the director reasonably believes to be reliable and competent, from a professional adviser on a matter within that person’s competence, or from another director or a committee on which the director did not serve, within that person’s authority (section 145). The reliance protects the director only if the director acts in good faith, makes a proper inquiry where the circumstances indicate that an inquiry is needed, and does not know that the reliance is unwarranted. Meera may rely on a quote prepared by Tamarind’s bookkeeper whom she reasonably believes to be competent. She may not rely on a figure she knows the bookkeeper invented.

Indemnity and insurance

Except where section 161 allows it, the company must not indemnify a director, or buy insurance for a director, against liability for an act or omission in that capacity, or against the costs of defending that liability. An indemnity given outside those permissions is void.

Tamarind has no constitution, so the Act’s permissions are available. The company may indemnify Meera for the costs of proceedings about her conduct as a director in which judgment is given in her favour, or she is acquitted, or the proceedings are discontinued or a threatened claim is dropped. It may indemnify her for liability to a person other than the company, and for the costs of defending that claim. That permission does not cover criminal liability. It also does not cover a breach of the duty to act honestly, in good faith, in the best interests of the company and for a proper purpose.

Insurance needs the board’s prior approval. It may cover liability that is not criminal, the costs of defending that liability, and the costs of defending a criminal proceeding in which she is acquitted. The board records the indemnity or the insurance in the minutes. If the company effects insurance without that approval or without the record, Meera is personally liable to the company for the premium unless she proves that the insurance was fair to the company when it was effected.

Companies Act, sections 145, 160 and 161. CBRD text, 15 May 2026.

What you should now be able to explain

A director manages the company. A shareholder holds the shares. The duties in section 143 are owed to the company. With two directors and no quorum fixed, both must take part before the board has decided, and a one-to-one vote fails because the chairperson has no casting vote. The decisions chapter sets out the three ways that board decision can be taken, and the shareholders’ count. A breach can be a fine of up to Rs 100,000 and imprisonment of up to 12 months, compensation and an account of profits to the company, and, where debts cannot be paid as they fall due, an order in favour of creditors if the company is later liquidated. A private-company director is removed by special resolution. The business-judgment protection stops where the director has a material personal interest, and an indemnity cannot cover a breach of the duty to act in the company’s best interests.

Next: the decisions chapter counts the resolutions this chapter has used. The shares chapter then takes the holdings.