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I know that a company is a separate legal entity and that ownership and control is distinguished. The constitution of a company dictates that the powers of control are delegated to the board and that such directors/agents have a responsibility to the company and not necessary the owners.
Sir, kindly say if the notion that “directors are to act in the best interest of shareholders”, is a byproduct of the directors direct responsibility to the company (as a separate legal entity), or do directors/agents have a direct duty/responsibility to shareholders?
The relationship between directors and shareholders is usually described as an agency relationship where the principals are the shareholders and the directors are the agents. Agents have a duty to act in the best interests of their principals.
Therefore, I conclude that directors owe their duties to the shareholders (just as an employee in an unincorporated business owes duties to their employer).
However, I am not a legal expert and doubt that the distinction you want to make will have much nearing in the SBL exam.
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