Chapter - 2
Director’s Duties of Care and skill
Generally, there are many duties and obligations of a company director
designated in the economic field.
A company director's duties can be include determining and implementing
policies and making decisions, preparing and filing statutory documents with the
Companies Office or other agencies, calling meetings, including an annual meeting of
shareholders, maintaining and keeping records, binding the company to contracts with
suppliers, lenders and others dealing with the company.
2.1 Duty to Act with Care and diligence
The duty of skill and care evolved from the basic fiduciary duty and sought to
address the particular implications of the director’s position within the limited
company environment. Shareholders entrust to director’s responsibility for running a
business which is funded by the capital they have invested. Those shareholders,
therefore, have a direct interest in the degree of skill with which the directors manage
the business. A further feature of the limited company environment which had a
bearing on the development of the duty of skill and care was and still is that the
concept of limited liability ensures that the members of a company are able to limit
their personal liability to the company’s creditors for the company’s debts. Thus, both
shareholders and creditors have always had to accept significant financial risks in
their dealings with company directors. The duty of skill and care evolved as a means
of restricting those risks to an acceptable level.1
Accordingly, the standards expected of directors have been modest and have
concentrated mainly on considerations of whether the director concerned has lived up
to the standards that may be expected by reference to his or her own background and
experience. This situation has, however, been changing in recent years and the Act
gives a further boost to the trend towards the expectation of higher standards of skill
and care.
The Myanmar Companies Act (2017) provides for certain obligations and
duties of the board of directors and individual directors. There are a number of
statutory provisions in different Myanmar laws and regulations which relate to the
1
A guide to directors’ responsibilities under the Companies Act 2006, ACCA
duties and liabilities of a company. Generally, the directors as representatives of the
company must ensure compliance with all applicable laws and regulations.
The duties of a director can be broadly divided into three categories, namely:
1. Fiduciary duties,
2. Duties of care, skill and diligence, and
3. Statutory duties.
The duties of a director originate from Myanmar legislation, Myanmar case
law and general common law.2
The Myanmar Company law 2017 provided that directors have duty to act
with care and diligence. Under Section 165 of the said law, it provided as follow -
(a) A director or officer must exercise their powers and discharge their duties with the
degree of care and diligence that a reasonable person would exercise if they:
(i) were a director or officer of the company in the company’s circumstances; or
(ii) occupied the office held by, and had the same responsibilities within the
company as, the director or officer.
(b) A director or other officer who, in the exercise of their powers and discharge of
their duties, makes a decision to take, or not take, an action in relation to the
operation of the company’s business, is taken to meet the requirements of sub-
section (a), and any like legal or equitable duties, and the duty in section 170, if
they:
(i) make the decision in good faith for a proper purpose;
(ii) do not have a material personal interest in the subject matter of the decision;
(iii) inform themselves about the subject matter of the decision to the extent they
reasonably believe to be appropriate; and
(iv) rationally believe that the decision is in the best interests of the company. 3
In the case of Re City Equitable Fire Insurance co Ltd (1925) Ch 407, the case
resulted from the insolvency of an insurance company due to the manifold illegal
activities of its managing director. the company lost £1,200,000 in failure of
investments and the large scale fraud of the chairman, Gerard Lee Bevan, ‘a daring
and unprincipled scoundrel’. The liquidator sued the other directors for negligence.
The auditors were sued too, but the Court of Appeal held by provisions in the
2
Directors’ Duties and Liabilities in Myanmar Updated: November 2017
3
Section 165 of the Myanmar Company Law, 2017
company’s articles. ‘A director need not exhibit in the performance of his duties than
may reasonably be expected from a person of his knowledge and experience.’4
In the case of Re Brazilian Rubber Plantation and Estates (1911) 1 Ch 425, a
multinational rubber company which had five directors, one of them confessed that he
was absolutely ignorant of business, the 2nd one was 75 years old and very deaf and
The other 3 were fairly able to businessmen, made substantial losses after foolhardy
speculative investments in Brazil. ‘A director may undertake the management of a
rubber company in complete ignorance of everything connected with rubber, without
accruing responsibility for the mistakes which may result from such ignorance. Such
reasonable care as a director owes to his company must be measured by the care an
ordinary man might be expected to take in the same circumstances on his own behalf.’
It transpired that the directors had no experience in the business of rubber plantations
and few qualifications or personal qualities to justify their lofty posts within the
company.5
4
(1925) Ch 407
5
(1911) 1 Ch 425