Exam (elaborations)
Directors Duties Essay
- Module
- Company Law
- Institution
- University Of Reading (UoR)
This is a question on Directors Duties in which I attained an A for my exams. Hope this will help you in structuring your answer.
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Director's Duties essayThe question necessitates a discussion of Director's Duties as defined by the Companies Act of
2006. Every director of a company must abide by the relevant provisions. S170-s178, in
particular, deal with the main provisions of the Director's Duties. It is stated under S178 CA 2006
that among other remedies are equitable principles and resignation.
To begin, it is critical to understand who qualifies as a director. A director, according to S50 CA
2006, is anyone who holds the position of director by "whatever name is called." The Board of
Directors is another name for the Board of Directors. According to the first principle of the
Combined Code on Corporate Governance, "every company should be led by an effective board
that is collectively responsible for the company's success."
To begin, there are de jure directors. These directors are duly and legally appointed to the
Board. In other words, they are legal, directors. Meanwhile, there are de facto directors, who
are not de jure directors but are directors nonetheless. They are part of the corporate governing
structure of the company, and they have assumed the status and functions of a company
director, making themselves liable as if they were de jure directors. This was demonstrated in Re
Kaytech, where it was determined that a person who was deeply and openly involved in the
company's affairs, devoted himself to the company's financial and property interests, dealt with
creditors, suppliers, and the company's professional advisers, is a de facto director. In addition,
the Board is made up of both executive and non-executive directors. The distinction between
the two is that executive directors typically work full-time for a company under the terms of a
service contract. Non-executive directors, on the other hand, are typically found in larger
corporations.
It should be acknowledged that the CA 2006 includes provisions for the removal of directors.
According to S.168 CA 2006, a director can be removed by ordinary resolution of the
shareholders at any time before his term of office expires. Furthermore, S169 specifies the
process to be followed in order to remove a director. This provision applies regardless of any
, contrary agreement between the director and the company. Aside from that, any resolution to
dismiss a director requires a special notice. There's nothing in the Act that prevents articles
from granting special voting rights to a director's shares. As a result, according to Bushell v
Faith, a director can protect himself against dismissal to some extent through the articles.
According to S170 CA 2006, directors have general duties to the company rather than the
shareholders. They also have no direct obligations to the company's creditors, either
individually or collectively. This principle was recently applied in the case of Sharp v Bank
(2017). It involved the ill-fated acquisition of HBOS by Lloyds Bank, and the pleadings included
an accusation that Lloyds' directors breached their fiduciary duties to their shareholders when
they recommended the acquisition as being in their best interests. The courts determined that
the directors owed no fiduciary duty to the shareholders because there was no special
relationship with them and the directors did not accept to act for or on their behalf in any
extended manner.
S171 CA 2006 states that directors must act in accordance with the company's constitution. This
provision is concerned with ensuring that directors follow the agreed-upon division of power
between them and the shareholders within the company. The directors are "responsible for the
management of the company's business for which they may exercise all the powers of the
company," subject to the articles and any directions made by shareholders by special resolution.
This is supported by Lee Panavision Ltd v Lee Lighting, which states that if powers are granted
to directors for a specific purpose, they must not be used for any other purpose or to further
the directors' personal interests. If there is a violation of proper purpose, the shareholders can
ratify it (Bandford v Bandford). Overall, the decision in Re Smith & Fawcett Limited 1942
determined that the purpose of this provision is to concentrate on the "proper purpose
doctrine." This provision was used in Hogg v Cramphon, which held that attaching multiple
voting rights to shares issued by a company that violated its articles was ineffective. This is
because the power to issue shares is a fiduciary power, and if it was used improperly, the issue
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