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Summary Business Law and Practice - Directors Duties Revision Table
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Revision table - Directors' duties (general ss170-177), directors' liabilities
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Duty DetailsDirectors Powers MA 3 – directors are responsible for the management of the company and can
exercise all the company’s powers
MA 5 – Directors may delegate to such person or committee by such means to
such an extent in relation to such matters or territories and on such terms and
conditions as they think fit
MA 7 – general rule as to decision making by directors = done by majority
decision at board meeting.
MA 8 – board can exercise decisions unanimously without a meeting held so long
as directors indicate to one another that they share a common view on a matter
ie could be as informal as a text message (Table A – s72)
Authority
1- Actual authority (principal (company) gives agent (director) specific prior
consent to agents actions
2- Apparent
apparent authority = agent (director) acts without the principal’s (company’s)
prior consent but still binds principal (company) in the contract with the third
party.
Based on words or conduct to third party that person in question (director)
is acting with company’s authority
Cannot arise by agent’s own actions, but only actions of the company
Basis of apparent authority = company is estopped from denying the
agent’s authority to bind the company in contract with third party
When a company puts forward an employee as someone with whom the
seller can contract, and the company honours the contracts made, then
that employee has apparent authority to make further contracts
Company can be bound because it failed to correct the mistaken
impression upon which the claimant has entered into the contract
Directors bind company when they act with either actual or apparent authority. If
they exceed this authority, they will not bind the company AND they will be
personally liable for breach of warranty of authority to any third party, and the
contract
Improper agreement entered into without the knowledge of the other directors
was unenforceable against the company, as the director in question had neither
actual nor apparent authority
General duties 170Scope and nature of general duties
(3)The general duties are based on certain common law rules and equitable
principles as they apply in relation to directors and have effect in place of those
rules and principles as regards the duties owed to a company by a director.
(4)The general duties shall be interpreted and applied in the same way as
common law rules or equitable principles, and regard shall be had to the
corresponding common law rules and equitable principles in interpreting and
applying the general duties.
Duties apply to all directors of the company
,Duties capable of applying to shadow directors where they are capable of
applying
S170(1) – directors owe their duties to the company rather than to the
shareholders, creditors or other directors
In exceptional circumstances, directors may owe duty to shareholders as well as
to the company (ie where they agreed to act as agents for the shareholders/
assumed responsibility for giving advice ot the shareholders on their
shareholdings
Director may owe duties to creditors of their company rather than to shareholders
if company is insolvent or approaching insolvency this is to promote the
success of the company (s172(3))
Annual responsibilities
Company records
Must keep adequate accounting records (s386(1))
It is directors’ responsibility to ensure that full accounts are produced for each
financial year (s394)
Accounts must give true and fair view of state of affairs of company a (s396(2)
Directors must not approve accounts unless they are satisfied that they give true
and fair view of assets, liabilities, financial position, profit and loss of company
(s393(1))
Every company must prepare directors’ report for each financial year to
accompany accounts (s415)
Accounts, directors report and auditors report must be circulated to every
shareholder in accordance with s423(1)
Directors report must include business review s417
Directors must file accounts and directors report for each financial year with
company’s house s441
so-called ‘micro-entities’, ‘small’ and‘medium-sized’ companies may file an
abbreviated version of the year-end accounts (SmallCompanies (Micro-Entities’
Accounts) Regulations 2013 (SI 2013/3008), CA 2006, s 444 ands 445
respectively)
A micro-entity is defined in s 384A of the CA 2006 as one which satisfies at least
two of thefollowing requirements:
(a) annual turnover: not more than £632,000;
(b) balance sheet total: not more than £316,000;
(c) number of employees: not more than 10.
A small company is defined in s 382(3) of the CA 2006 as one which satisfies at
least two ofthe following requirements:
(a) annual turnover: not more than £10.2 million;
(b) balance sheet total: not more than £5.1 million;
(c) number of employees: not more than 50.
A medium-sized company is defined in s 465(3) of the CA 2006 as one which
satisfies at leasttwo of the following requirements:
, (a) annual turnover: not more than £36 million;
(b) balance sheet total: not more than £18 million;
(c) number of employees: not more than 250
Time limit for filing accounts is nine months from end of accounting reference
period for private company (s442(2))
Confirmation statements
Every company must submit confirmation statement to Registrar of Companies
once in every 12-month period
Directors are responsible for doing this within 14 days after company’s
confirmation date (s853A(1) and (3)
Company’s first incorporation date = date of anniversary of date of its
incorporation
Form CS01 = designed to ensure that information is kept up to date
Directors in managing the company have the power to recommend payment of a
dividend to the company’s shareholders
S171 Duty to act within powers
A director of a company must—
(a)act in accordance with the company's constitution, and
(b)only exercise powers for the purposes for which they are conferred
CASE Howard Smith Ltd v Ampol Petroleum Ltd)
This would be the case even if the directors believed this actionwas in the best
interests of the company
CASE Pergamon Press Ltd v Maxwell [1970] 1 WLR 1167
A breach ofthis duty may also arise, though, in relation to the exercise of other
powers, such as the powerto call general meetings
CASE Lee Panavision Ltd v Lee Lighting Ltd [1992] BCLC 22)
or the power to enterc ontracts on behalf of the company
S172 Duty to promote the success of the company
(1)A director of a company must act in the way he considers, in good faith,
would be most likely to promote the success of the company for the
benefit of its members as a whole, and in doing so have regard (amongst
other matters) to—
(a)the likely consequences of any decision in the long term,
(b)the interests of the company's employees,
(c)the need to foster the company's business relationships with suppliers,
customers and others,
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