and his own interest conflict or even may conflict. This rule often comes into play in the case of contracts between a company and a director. There is nothing in itself invalid in such a contract, but the onus is on the director if he would keep such a contract to show that the company assented to his making a profit out of the contract, and for that purpose he must show that he made full and fair disclosure to the company of the nature and extent of his interest under the contract. It is for this reason that when a company’s vendor is also a director he does not join the board until his co-directors have exercised an independent judgment on the propriety of the purchase.
A director must also bear in mind—what is a fundamental principle of company management—that the funds of the company are entrusted to the directors for the objects of the company as defined by the company’s memorandum of association and authorized by the general law, and that they must not be diverted from those objects or applied to purposes which are outside the objects of the company, ultra vires, as it is commonly called, or outside the powers of management given by the shareholders to the directors. This does not abridge the large discretion allowed to directors in carrying on the business of the company. The funds embarked in a trading company are intended to be employed for the acquisition of gain, and risk, greater or less according to circumstances, is necessarily incidental to such employment; but it is quite another matter when directors pay dividends out of capital, or return capital to the shareholders, or spend money of the company in “rigging” the market, or in buying the company’s shares or paying commission for underwriting the shares of the company except where such commission is authorized under acts of 1900 and 1907, incorporated in the Companies Act 1908. Directors who in these or any other ways misapply the funds of the company are guilty of what is technically known as “misfeasance” or breach of trust, and all who join in the misapplication are jointly and severally liable to replace the sums so misapplied. The remedy of the company for misfeasance, if the company is a going concern, is by action against the delinquent directors; but where a company is being wound up, the legislature has, under the Winding-up Act 1890, provided a summary mode of proceeding, by which the official receiver or liquidator, or any creditor or contributory of the company, may take out what is known as a misfeasance summons, to compel the delinquent director or officer to repay the misapplied moneys or make compensation. The departmental committee of the Board of Trade in its report (July 1906) recommended that the court should be given a discretionary power, analogous to that it already possesses in the case of trustees under the Judicial Trustees Act 1896, s. 3, to relieve a director (or a promoter) in certain cases from liability. This recommendation has been given effect to by s. 279 of the Companies Act 1908, which provides that, “If in any proceeding against a director of a company for negligence or breach of trust it appears to a court that the director is or may be liable in respect of the negligence or breach of trust, but has acted honestly and reasonably and ought fairly to be excused for the negligence or breach of trust, the court may relieve him either wholly or partly from his liability on such terms as the court may think proper.”
Directors who circulate a prospectus containing statements which they know to be false, with intent to induce any person to become a shareholder, may be prosecuted under § 84 of the Larceny Act 1861. They are also liable criminally for falsification of the company’s books, and for this or any other criminal offence the court in winding up may, on the application of the liquidator, direct a prosecution. As to the liability of directors for statements or omissions in a prospectus see Company.
In managing the affairs of the company directors must meet together and act as a body, for the company is entitled to their collective wisdom in council assembled. Board meetings are held at such intervals as the directors think expedient. Notice of the meeting must be given to all directors who are within reach, but the notice need not specify the particular business to be transacted. The articles usually fix, or give the directors power to fix, what number shall constitute a quorum for a board meeting. They also empower the directors to elect a chairman of the board. The directors exercise their powers by a resolution of the board which is recorded in the directors’ minute-book.
The court will not as a rule interfere with the discretion of directors honestly exercised in the management of the affairs of the company. The directors have prima facie the confidence of the shareholders, and it is not for the court to say that such confidence is misplaced. If the stockholders are dissatisfied with the management the remedy is in their own hands—they can call a meeting and elect a new board.
A company’s articles usually provide for the payment of a certain sum to each director for his services during the year. When this is the case it is an authority to the directors to pay themselves the amount of such remuneration. The remuneration, unless otherwise expressly provided, covers all expenses incidental to the directors’ duties. A director, for instance, cannot claim to be paid in addition to his fixed remuneration his travelling expenses for attending board meetings.
When a company winds up, the directors’ powers of management come to an end. Their agency is superseded in favour of that of the liquidator. (E. Ma.)
DIRECTORY, a term meaning literally that which guides or directs, and so applied to a book or set of rules giving directions for public worship. The directorium or ordo of the Roman Church contains regulations as to the Mass and office to be used on each day throughout the year, and the word is found in the Directory for the Publick Worship of God drawn up in 1644 at the Westminster Assembly. The term now usually signifies a book containing the names, addresses and occupations, &c. of the inhabitants of a town or district, or of a similar list of the users of a telephone supply, or of the members of a particular profession or trade. The name Directoire or Directory was given to the body which held the executive power in France from October 1795 until November 1799 (see French Revolution).
DIRGE, a song or hymn of mourning, particularly one sung at funerals or at a Service in commemoration of the dead. It is derived from the first word of the antiphon ”Dirige, Domine, Deus meus, in conspectu tuo viam meam” (Guide, O Lord, my God, my way in Thy sight), of the opening psalm in the office for the dead in the Roman Church. The antiphon is adapted from verse 8 of Psalm v.
DIRK, a dagger, particularly the heavy dagger carried by the Highlanders of Scotland. The dirk as worn in full Highland costume is an elaborately ornamented weapon, with cairngorms or other stones set in the head of the handle, which has no guard. Inserted in the sheath there may be two small knives. The dirk, in the shape of a straight blade, with a small guard, some 18 in. long, is worn by midshipmen in the British navy. The origin of the word is doubtful. The earlier forms were dork and durk, and the spelling dirk, adopted by Johnson, represents the pronunciation of the second form. The name seems to have been early applied to the daggers of the Highlanders, but the Gaelic word is biodag, and the Irish duirc, often stated to be the origin, is only an adaptation of the English word. It may be a corruption of the German Dolch, a dagger. The suggestion that it is an application of the Christian name “Dirk,” the short form of “Dieterich,” is not borne out, according to the New English Dictionary, by any use of this name for a dagger, and is further disproved by the earlier English spelling.
DIRSCHAU, a town of Germany, in the kingdom of Prussia, province of West Prussia, on the left bank of the Vistula, 20 m. S. from Danzig and at the junction of the important lines of railway Berlin-Königsberg and Danzig-Bromberg. Pop. (1905) 14,185. It has a Roman Catholic and a Protestant church and several schools. The river is here crossed by two fine iron bridges. The older structure dating from the year 1857, originally used for the railway, is now given up to road traffic, and the railway carried by a new bridge completed in 1891. Dirschau has railway workshops and manufactories of sugar, agricultural implements and cement. During the war with Poland, Gustavus Adolphus made it his headquarters for many months after its capture in 1626.
