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Directors' Duties Notes

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DIRECTORS' DUTIES

1. NATURE of the breach and who's committed it.

2. What further INFORMATION might be needed to decide whether there has been a breach.

3. What could be done to AVOID a breach.
 S.170(1) Companies Act 2006 - The general duties specified in sections 171 to 177 are owed by a director of a company to the company.
 In general, directors owe their company a fiduciary duty.
 Aberdeen Rly Co v Blaikie Bros (1854): directors are agents of the company whose duty is to act as to best promote the interests of the company. Such agents have duties to discharge of a fiduciary nature towards their principal.
Section Duty
Example
Duty to act within powers
Punt v Symons (1903): If the issuing of shares is to raise capital and
Act in accordance with the company's constitution and only exercise powers for not to help block an undesirable takeover, a director cannot issue which they are conferred (also see MA 3).
new shares to people just so they will oppose the block. He is not 171 using his powers for the purpose for which the powers were conferred - keeping themselves in office is not regarded as a 'proper purpose'.
 Directors taking on an overdraft/more debt when there is 172 Duty to promote the success of the company
Act in the way he considers, in good faith, would be most likely to promote the substantial money owed on a current overdraft.
success of the company for the benefit of its members as a whole.
 Not doing due diligence when entering into an agreement.
 Must have regard (amongst other matters) to:
o the likely consequences of any decision in the long term

the interests of the company's employees

the need to foster the company's business relationships with suppliers,
customers and others

the impact of the company's operations on the community and the environment

the desirability of the company maintaining a reputation for high standards of business conduct

the need to act fairly as between the members of the company
 Regentcrest plc v Cohen (1988) - subjective test: did the directors think they were acting in good faith for the benefit of the members?
 Charterbridge Corp Ltd v Lloyds Bank Ltd (1970) - objective test: is the director an honest and intelligent person acting in the position of director?
 difficult to breach - concept of business judgment, so the courts don't like to intervene
 unless the company's survival is at risk, mere incompetence will not constitute a breach in fiduciary duty if the director honestly believed he was acting in the best

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