First Class revision notes on Company law for the LLB, based on Durham University lectures. These notes contain over 50 academic references, cases and judge commentary, laid out on an easy-to-flow structure, a step-by-step guide and clear examples. Having these notes to hand will radically shorten ...
4. ENFORCING DIRECTORS’ DUTIES
Avoiding or relieving liability:
S232 CA: Contracting out of directors’ duties, protecting them from liability
(1): Any provision that purports to exempt a director of a company from any liability
that would otherwise attach to him in connection with any negligence, default, breach
of duty of trust in relation to the company is void
S233: Insurance policies are permissible
S173: duties can be adjusted contractually, but not opted out of
Authorisation and ratification:
Authorisation: ‘ex ante’ approval for what the directors are going to do: prevents a
duty occurring. Every SH is entitled to vote
Ratification: ‘ex post’ excusing what a director has done, releasing them from liability
for the breach of duty that’s already occurred. S239(4): must be affected without the
votes of the wrongdoing directors, or those connected (s252)
SH must be fully informed about what they are ratifying/authorising: Instant Access
Properties v Rosser 2018
Can all breached be authorised/ratified?
o S180(4)(a) and 239(7): this is left to the common law
o Orthodox view: serious breaches cannot be authorised or ratified, they are
beyond the reach of SH
o Alternative view: even fraudulent wrongs can be ratified/authorised
Edwards v Halliwell: breaches of duty amounting to fraud on the
minority were incapable of ratification by a simple majority
Franbar Holdings v Patel: Support for the alternative view, but only if
this were done by disinterested SH, meaning in an independent way
and they can have no influence of the majority vote.
This follows s239
Christopher Riley: Even if all wrongs are to be regarded as ratifiable,
the precise process of ratification must still vary according to whether
the wrong in question is, or is not, properly categorised as fraud
Invoking Ex turpi causa:
Director acting unlawfully was doing on behalf of the company and so the illegal
behaviour is attributed to the company
Stone and Rolls v Moore Stephens 2009: the action will be brought against the
company
Bilta v Nazir 2015: this was knocked on the head, the company will not be acting
unlawfully, it was just in virtue of the unlawfulness from the defendant
S1157: The power of the court to grant relief in certain cases:
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