In a shareholder dispute between two brothers, it was discovered that one brother, who served as sole director of the company, signed a board decision in which he granted his company a right to receive funds from a legal proceeding in which the company won, as partial indemnification for company expenses that he personally incurred.
The Court found that the board's decision on the assignment of the debt is invalid and does not bind the company. A director of a company has a fiduciary duty, which means that the director must act when he has the interest of the company before him and not a personal interest, and is required to act in good faith, fairly, and for the benefit of fulfilling his role. Here, it is an action of a director which is certainly not in the best interest of the company out of concern for the company’s interest, but a taking from the company of an asset for the director’s personal benefit. Even if the company did owe the director funds at the time, as a director of the company he acted against its interest and the decision of the board of directors required the approval of the general meeting which was not retrieved. Therefore, this is an action exceeding authorization that does not obligate the company and the debt assignment is void.