Revision notes on directors duties in Company Law.
Includes statutory provisions accompanied by and explanation of key cases.
These notes were used for final year LLB Law studies in which I achieved a mark of 70% for Company Law.
Directors Duties
Who is a Director?
• CA 2006 S250 – ‘director includes any person occupying the position of
director, by whatever name called
• The definition of director relates to an individual with direct control over the
day-to-day management of the company
• De facto directors – a person who acts in the role of director without ever
having been formally appointed as such
• Shadow directors – persons on whose directions or instructions the company
is accustomed to act (CA 2006 251)
• Model articles (3) – directors’ general authority – subject to the articles, the
directors are responsible for the management of the company’s business, for
which purpose they may exercise all the powers of the company
• Gemma Ltd v Davies [2008] – G was the director of a building business and
his wife was the company secretary. As part of the claim against the
company, the court was required to consider whether liability should be
extended to the wife as a de facto director of the company
Held – the test to be applied in deciding whether a person was a shadow or
de facto director were…
(a) whether they undertook functions in relation to the company which could
be discharged only by a director
(b) whether they participated in directing the affairs of the company on an
equal footing and not in a subordinate role
(c) and whether they assumed the status and functions of a company director
Appointment of Directors
• CA 2006 s154 – a private limited company must have at least one director
and a public limited company must have at least two
• CA 2006 s162 also requires the company to maintain a register of directors
• The procedure for appointment of directors is usually contained in the articles
of association
• Model articles 17(1) any person who is willing to act as a director, and is
permitted by law to do so, may be appointed to be a director –
(a) By ordinary resolution, or
(b) By a decision of the directors
• Directors can be removed at any time by ordinary resolution (majority of votes
cast) under CA 2006 s168
Directors Duties
• Key director’s duties are governed by CA 2006 –
(a) S171 – duty to act within powers
(b) S172 – duty to promote the success of the company
(c) S173 – duty to exercise independent judgement
(d) S174 – duty to exercise reasonable care, skill, and diligence
(e) S175 – duty to avoid conflict of interest
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