Director Duties

Question 1

Section 171

Answer 1

Duty to act within their powers

Director must act in accordance with the constitution and only exercise powers for purpose conferred.

Question 2

Section 172

Answer 2

Duty to Promote Success of the Company
To promote success for the company for the benefit of the members as a whole

Section 414 - Annual strategic report on how directors fulfil 172

Question 3

Section 173 - Duty to exercise Independent Judgment

Answer 3

Must exercise independent judgment and this is not infringed by contracts entered into by the company that restricts the future discretion of the directors.

Question 4

Section 174

Answer 4

Take reasonable care, skill and diligence - objective standard first and then raised further by subjective standard.

Question 5

Section 175

Answer 5

Duty to avoid conflict of interests
Must avoid actual and potential conflicts, directly or indirectly with the company
Applies in particular to the exploitation of property, information or opportunity belonging to a company (immaterial whether they can take advantage of it)
Can be authorised by directors in a limited company (unless permission is withdrawn in articles of association)

Question 6

Section 176 - Duty not to accept benefits from third parties

Answer 6

Must not accept benefit from third party conferred because (a) his being a director and (b) his doing or not doing anything as a director.

Not infringed if benefit is not likely to give rise to a conflict

Question 7

Section 177

Answer 7

Duty to declare interest in proposed transaction or arrangement

Director of a company, directly or indirectly, interested in a proposed transaction, must declare nature and extent.

Declaration to be made at a meeting of directors or notice to directors in accordance with s.184 and 185.

Declaration made before company enters into transaction.

Question 8

Section 178

Answer 8

Consequences of the Breach - (1) consequences of breach are the same as the common law and equitable principle applied (2) applied in same way as other fiduciary duty to the company except section 174

Question 9

Section 182 - Declaration of Interest in Existing Transaction

Answer 9

Retrospective declaration where a new director is appointed to the board and has an interest or conflict of interest. Must be made at a meeting of directors, written notice section 184 and general notice under section 185

Question 10

To whom are the director duties owed?

Answer 10

Section 170(1) the duties are owed to the company.

Foss v Harbottle - the company is the proper claimant.