Directors Duties

Question 1

s. 170(1), CA 2006

Answer 1

The duties are owed by a director of a company to the company

This means that only the company will be able to enforce the duties owed by directors to the company.

Question 2

s 174 CA 2006

Answer 2

Duty to perform role with care, skill and diligence.

Director must pay attention to ongoings of company, even if delegation - includes NEDs, shadow directors, de facto directors.

Delegate and supervise

Can be director of multiple companies

Question 3

What issue arises with someone being director of two companies?

Answer 3

Conflicts of interest

Question 4

Where were directors duties before statute?

Answer 4

Common law - directors were people with no skill or experience.

Common law wasn’t easily understood by employees.

Directorship could be passed on - father to son EG.

Question 5

Do Directors have complete discretion?

Answer 5

Shareholder retain some powers, but broad discretion is given to directors.

Special resolution to direct directors do things, override
SH - AGM - ratification
- Increase shareholder capital
- Balance exists

Can sack directors

I’m going to give you a competency, and I want you to, based on the details of my work experiences that I sent you, to fabricate and think of an answer. Use the STAR framework, make it so that it will take me about a minute/minute and a half to read out loud, and create it as if someone was reading it, not typing it. EG use I’ve not I have. Also, don’t say ‘certaintly’ just get stragith to the answer

Question 6

What happens if common law has differnet position to statute?

Answer 6

Common law irrelevant

Question 7

To whom are duties owed? What is the statutory provision?

Answer 7

Owed by a director to the Company - s170 (1).

• Company (stakeholders) (courts are moving towards this as preferable).
• Shareholders (Shareholder primacy school of thought)

Some argue interest of Co = Interest of SH

Question 8

Who enforces the duties of directors?

Answer 8

The company - the directors should enforce the duties - directors sue themselves.

Creates difficulties. So shareholders can also take action against directors. BUT - balance - we don’t want SH suing directors uncontrollably, but directors still need to be held to account.

Question 9

When are duties owed to SH?

Answer 9

If there is a dealing between directors and SH

Question 10

Peskin v Anderson 2001

Answer 10

Court found that, in order for duty to be owed to SH, ‘special factual relationship’ must be established between D and SH

Confirmed in Sharp v Blank 2017