Director's Duties

Question 1

Explain the obligations of a fiduciary

Answer 1

Bristol and West Building Society v Mothew - Millet LJ = Fiduciary undertakes to act for another person in circumstances which give rise to a relationship of trust and confidence. Obligation of (single-minded) loyalty to fiduciary.
Subjective test

Question 2

To whom do the directors generally-speaking owe their duties?

Answer 2

DD owed to the company - Section 227(1) and not to individual shareholders - Percival v Wright

Question 3

Explain the relationship between DD and creditors.

Answer 3

DD to creditors applies where company insolvent - Mason J in Walker v Wimborne and Blayney J in Re Frederick Inns

Question 4

Discuss directors owing a duty to individual shareholders.

Answer 4

When they have expressly undertaken certain obligations - Allen v Hyatt
Where the company is proposing a takeover - Securities Trust Ltd v. Associated Properties Ltd

Question 5

Discuss DD and employees.

Answer 5

S224(1) - Directors have to have regard to employees’ interests in the performance of their functions
S224(2) - Only company can enforce duties (meaningless)

Question 6

What are the eight principle fiduciary duties set out in S228(1)?

Answer 6

(a) act in good faith in what the director considers to be the interests of the company;
(b) act honestly and responsibly in relation to the conduct of the affairs of the company;
(c) act in accordance with the company’s constitution and exercise his or her powers only for the purposes allowed by law;
(d) not use the company’s property, information or opportunities for his or her own or anyone else’s benefit unless—
(i) this is expressly permitted by the company’s constitution; or
(ii) the use has been approved by a resolution of the company in general meeting;
(e) not agree to restrict the director’s power to exercise an independent judgment unless—
(i) this is expressly permitted by the company’s constitution;
(ii) the case concerned falls within subsection (2); or
(iii) the director’s agreeing to such has been approved by a resolution of the company in general meeting;
(f) avoid any conflict between the director’s duties to the company and the director’s other (including personal) interests unless the director is released from his or her duty to the company in relation to the matter concerned, whether in accordance with provisions of the company’s constitution in that behalf or by a resolution of it in general meeting;
(g) exercise the care, skill and diligence which would be exercised in the same circumstances by a reasonable person having both—
(i) the knowledge and experience that may reasonably be expected of a person in the same position as the director; and
(ii) the knowledge and experience which the director has;
And
(h.) in addition to the duty under section 224 (duty to have regard to the interests of its employees in general), have regard to the interests of its members.

Question 7

What are the principle remedies for breach of duty?

Answer 7

Profit made = Account to the company any profit made as a result of the breach
Breach of duty causing loss e.g. due to act with skill, care and diligence = Damages