COMPANY MANAGEMENT

DIRECTORS DUTIES PROBLEMQUESTION

Introduction
Which Duties (s170) arise?
The Duty is owed to the company this is contained in s170.
S170 ss3 tells us that it is based on common law rules and
equitable principles, this is because Ch 10 of the Act is codifying
in nature. In order to understand how there duties should be
interpreted however it is necessary to look to ss4 which
suggests that regard must be had to the rules of common law
and equity .

S171: DUTY TO ACT WITHIN POWERS ie in accordance with the

company constitution. Healy Hutchinson v Brayhead. Freeman
Lockleyar v Buckhurst suggest that a breach of this duty means
that there will be a corresponding duty to compensate the
comapny. Re Smith and Fawcett also suggest that powers cant be
used for a collateral purpose.

S172: PROMOTE SUCCESS

ss1 says that this must eb done in good faith that which is most
likely to promote the success of the company.
However we are not told what level of risk is prudent.
IS IT A LARGE OR SMALL COMPANY???
Presently under a labour government the persuasion is likely to
be towards the long term interest os the company. Cf GLOBAL
FINANCIAL CRISIS OF 2008 where there were accusations of
short terism.
Have enlightended shareholder values been taken into
account??

S173: INDEPENDENT JUDGEMENT is this really a defence or a

duty?

S174 REASONABLE CARE SKILL AND DILLIGENCE

ss2a reasonably diligent person with their knowledge ss2b, is
the correct standard. It’s a dul objective subjective test.
Re city Fire Insurance Co Romer LJ Pepole who willfully or
negligently assisted a fraud are also liable.
Some people think that this has created a quazi subjective test
TAKE INTO ACCOUNT THE SIZE OF THE BUSINESS!!!
Re D’Jan of London
Dorchester Financle v Stebbing what is reaonsbale for that
particular directors knowledge and Expereince/

S175 CONFLICTS OF INTEREST

Boardmann v Phipps
Regal v Gulliver
Sinclair Investment Holdings v Versailles Trade Finance no 3
(2007) reaffirmed that money will be held on constructive trust.
Marad v El Saraj

***Foster v Bryant (2007): Arden and Ricks LJJ suggest ed that

Boradman was too strict however this is unlikely to be followed
because after all directors know what they’re getting into!

S176: Duty not to take bribes

AG Hong Kong v Reed.
Tesco v Pook.
Daridond v Suland.
**Hestinger v Wilson (2007).
Vgrineft v Abramovich (2008).

Has there been a breach?

Is there an exclusion on exemption that would avoid liability?

What are the Consequences of breach?