Semester Two : Business Activities

Question 1

What are the seven duties of directors owed to company?

Answer 1

• Shareholders
• Creditors
• Market
• Criminal Law
• Civil Law
• Society or Company?

Question 2

Directors and Fiduciary Duties

Answer 2

• Directors are agents of the company and therefore general fiduciary duties of agent to principal apply to them.
• Regal (Hastings) v Gulliver

Question 3

Directors and Conflict of Interest

Answer 3

• Director must use for the benefit of his company, not personal benefit and must avoid any situation which could create conflict between one’s own interest and company’s.

Question 4

Duty of Loyalty

Answer 4

• Each director owes a duty of loyalty to the company.

- No rule against being director of more than one company but duty should not conflict with duty to others.

Question 5

Duty of Independent Judgement

Answer 5

• Must exercise independant judgement.

- Can and should give firm, independent advice but as long as acting within company constitution.

Question 6

Duty not to accept benefits from Third Parties

Answer 6

• Director may not receive benefit from any third party by reason of being director.

Question 7

Duty to declare interest

Answer 7

• They must declare it to other directors if there is a conflict of interest.
• No need to make declaration of interest which director is not aware of.

Question 8

Duty of operate within powers

Answer 8

• Operate to the full extent of their powers.
• Must not get fetter discretion.
• Cabra Estates PLC v Fulham FC

Question 9

Duty of care and skill

Answer 9

• Must use ‘reasonable care, skill and diligence’ in management of the company.
• Dorchester Finance CO v Stebbing

Question 10

C.i.f contracts

Answer 10

• ‘cost, insurance, freight’
• Seller undertakes to sell goods.
• But liability is limited to certain key elements.
• Does not include an obligation that goods will arrive safely.