LEGAL PERSPECTIVE: Duty of Board Directors and COVID -19 by Dr AbdelGadir Warsama, Legal Counsel, Bahrain

Dr AbdelGadir Warsama, Legal Counsel, Bahrain

Legally speaking, board directors of companies are questionable for all issues related to the activities and existence of their company. The company law includes clear provisions to incur such responsibilities. Herein, board directors shall be liable towards the company, shareholders and third parties at large for acts of fraud, abuse of authority, violation of the law or rules, moreover, shall be liable for mismanagement and or negligence. Any duty taken or not taken, in certain times, will be carefully assessed and they are fully questionable.

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The Corona Pandemic is a chronic acute situation that requires full attention with all senses. Mishandling, disobeying, non-cooperating with authorities to combat coronavirus, not adhering to lockouts or otherwise, all put direct responsibility. The right to take legal action, against the board, is there. They are exposed to legal proceedings from within or without the company. This indicates that they should perform their duties with utmost care, diligence, and high standards of professionalism, failing which the company, the shareholders or ant third party may take joint or separate legal proceedings against them.

The Chairman and directors are jointly liable if the negligence occurs because of a resolution(s) adopted unanimously. However, if the resolution(s) has been adopted by majority, the dissenting directors shall not be liable provided they have recorded their objections. Dissenting opinions shall be recorded, otherwise they are responsible regarding the outcome of that resolution(s). Moreover, important to mention, that mere absence will not absolve from liability unless proved that the director was not aware of the resolution or was aware but unable to show his objection. This stand, we believe, is very important because the intention of the legislature is to close the door for some who may prefer an “alibi” when they know that certain issues will be discussed and they don’t want to involve themselves.

An additional burden relates to the fact that the chairman and directors, also, shall not take any other work that may cause responsibility to the company. Conflict of interest rule shall be observed, to deprive occurrence of instances of malpractices, opportunism, and importation. However, the general assembly may give exemption, provided, this exemption shall not affect shareholders interests.

Board directors shall lead the war against COVID-19 and take all measures with standard duty of due care, otherwise they are questionable.

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