Directors Duties Flashcards
Under which part of the Companies Act 2006 are directors’ duties codified?
Part 10 of the Companies Act 2006.
What is the fiduciary nature of directors’ duties?
Directors act as fiduciaries to the company, similar to trustees, and must act in the company’s best interests, avoiding conflicts of interest.
(Aberdeen Railway Co v Blaikie Bros (1854))
What does Section 171 CA 2006 require of directors?
Directors must act within the company’s constitution and only for the purposes for which powers are conferred.
What is the proper purposes doctrine?
Directors must not misuse their powers for unintended purposes, such as issuing shares to alter control.
(Howard Smith Ltd v Ampol Petroleum Ltd (1974))
What case demonstrated improper use of company assets?
Extrasure Travel Insurance Ltd v Scattergood (2003): Funds were improperly transferred between group companies.
What is the key obligation under Section 172 CA 2006?
Directors must promote the success of the company for the benefit of its members as a whole.
What is the principle of Enlightened Shareholder Value in Section 172?
Directors must balance shareholder interests with long-term consequences, stakeholder relationships, and environmental impacts.
What test is applied to determine compliance with Section 172?
A subjective-objective test, as established in Charterbridge Corp Ltd v Lloyds Bank Ltd (1970).
Which case found directors liable for exploiting employees, violating Section 172?
Antuzis v DJ Houghton Catching Services Ltd (2019).
What does Section 173 CA 2006 require of directors?
Directors must exercise independent judgment.
When can directors rely on third-party advice without breaching Section 173?
When such reliance aligns with their independent judgment and is not blind obedience.
What breach was highlighted in Mahoney v Renwick (1896)?
A director failed to exercise independent judgment by yielding to shareholder instructions.
What are the remedies for breaching directors’ duties under CA 2006?
Compensation, restitution, injunctions, or setting aside improper transactions.
What principle does Section 174 CA 2006 enshrine?
Directors must exercise reasonable care, skill, and diligence.
What standard is applied under Section 174?
Both an objective standard and a subjective standard based on the director’s knowledge and experience.
(Re City Equitable Fire Insurance Co Ltd (1925))
What does Section 175 CA 2006 prohibit?
Directors must avoid situations where they have a direct or indirect conflict of interest with the company.
What case established the strict approach to conflicts of interest?
Regal (Hastings) Ltd v Gulliver (1942): Directors profited from their position and were liable to account for such profits.
Under what circumstances can conflicts of interest be authorized?
If the board or shareholders approve the conflict in accordance with the company’s constitution.
What does Section 176 CA 2006 prohibit?
Directors must not accept benefits from third parties that create a conflict of interest.
What exception exists for third-party benefits under Section 176?
Benefits of minimal value, such as corporate hospitality, are generally allowed.
What is the duty under Section 177 CA 2006?
Directors must declare any interest in a proposed transaction or arrangement with the company.
What case confirmed the need to disclose conflicts of interest?
Gwembe Valley Development Co Ltd v Koshy (2004).
What does Section 178 CA 2006 provide?
Breaches of directors’ duties are enforceable under common law remedies, including equitable remedies.
What protection does Section 1157 CA 2006 offer directors?
Relief from liability if the director acted honestly, reasonably, and ought fairly to be excused.