Directors' Duties Flashcards
1
Q
What are the key duties of directors under the Companies Act 2006?
A
- Duty to act within powers (s. 171) – Directors must act in accordance with the company’s constitution and only exercise powers for the purposes for which they were given.
- Duty to promote the success of the company (s. 172) – Directors must act in good faith to promote the success of the company for the benefit of its shareholders.
- Duty to exercise independent judgment (s. 173) – Directors must make their own independent decisions, avoiding external influence.
- Duty to exercise reasonable care, skill, and diligence (s. 174) – Directors must act with reasonable care based on their knowledge, skill, and experience.
- Duty to avoid conflicts of interest (s. 175) – Directors must not place themselves in a position of conflict.
- Duty not to accept benefits from third parties (s. 176) – Directors must not accept gifts or benefits that could create a conflict of interest.
- Duty to declare interest in transactions (s. 177) – If a director has a personal interest in a proposed transaction, they must declare it before the company enters the transaction.
- S. 182 CA 2006, directors must declare an interest in an existing transaction if they did not declare it earlier under s. 177.
2
Q
How do directors exercise their powers?
A
General authority (Model Article 3) – Directors manage the company’s affairs.
Board decisions (MA 7-8) – Can be made in board meetings or through unanimous written resolutions.
Delegation of powers (MA 5) – Directors can delegate specific responsibilities.
