1a) Advise Rachael on her position in respect of any breaches of her common law or statutory duty of care and diligence as a director
One of the issues raised in the case study is whether Rachael has breached her duties as a director under the common law or statutory duties. Statutory duties are enforced by ROC while common law duties are enforced by the company according to its Memorandum of Association (MOA) and Article of Association (AA) (Mohd Sulaiman & Bidin, 2008). Common law duties are owned by the directors and they must act in the best interest of the company and will be liable for any breach of duties obligated by the MOA and AA. A breach of the common law duty of care will usually result in the payment of compensation or damages to the company. On the other hand, director’s statutory duties are mentioned in Section 132(1A) of the Companies Act. Under Section 132(1A), a director of a company shall exercise reasonable care, skill and diligence with the knowledge, skill and experience which may reasonably be expected of a director having the same responsibilities and any additional knowledge, skill and experience which the director in fact has. Section 132(1A) was further elaborated into four categories of duties. The first category is that the director must exercise reasonable care (Mohd Sulaiman & Bidin, 2008). Under this provision a director is required to take reasonable steps to acquaint themselves with information concerning the company’s financial status and business. Referring to the case of Lim Weng Kee v PP, the managing director of three pawnshops was charged for releasing goods which had been pawned without first waiting for the cheque used to be cleared. The court held that a person in the position of the accused had not acted with due skill and care, as having the experience of being a pawnshop managing partner, he ought to have known that