Directors Codified General Duties Flashcards
To act within powers (S.171)
Howard Smith Ltd v Ampol Petroleum Ltd (1974)
Bamford v Bamford (1969)
A director has the duty to exercise the company’s powers for the purpose of which they were allocated to do. Must act within powers. A director must act in accordance with the company’s constitution and exercise power only for the purpose for which they were conferred.
To promote the success of the company (S.172)
Re Smith v Fawcett Ltd (1942);
JJ Harrison (Properties) Ltd v Harrison (2002)
Lonrho Ltd v Shell Petroleum Co Ltd (1980)
West Mercia Safetywear Ltd v Dodd (1988)
A director must act in a way he considers good faith and would be most likely to promote the success of the company for the benefit of its members as a whole. A director must consider 6 different factors regarding the company and the shareholders. For example the likely long-term consequences of any decision
To exercise independent judgement (S.173)
Boulting v Association of Cinematograph, Television and Allied Technicians (1963)
The constitution of a company may allow a director to delegate some of its duties. However, apart from this directors will be expected to exercise independent judgement and they should not obey instructions or be influenced by certain people.
To exercise reasonable care skill and diligence (S.174)
Lexi Holdings plc (in administration) v Luqman (2009)
A director is expected to exercise care, skill, and diligence from their general knowledge skill and experience enabling them to perform their functions as a director. There is no excuse for a director to lack expertise.
To avoid conflict of interest (S.175)
Aberdeen Railway Co v Blaikie Brothers (1854)
Regal (Hastings) v Gulliver (1942)
A director must avoid situations where they can have a direct or indirect interest that conflicts or may conflict with the interest of the company or another duty.
Not to accept benefits from third parties (S.176)
A director must not accept benefits from third parties from being or doing anything as a director unless the acceptance of the benefit cannot be reasonably regarded as being a conflict-of-interest eg a dinner invitation.
To declare interest in proposed transaction or arrangement (S.177)
Aberdeen Railway Co v Blaikie Brothers (1854)
Providing that a director is or ought to be reasonably aware of the situation then they must declare the nature and extent of any such interest to other directors unless it cannot reasonably be regarded as a confit of interest. The declaration may be made at a board meeting or by notice in writing or by general notice.
