BUSINESS LAW

LECTURE 6 DIRECTORS

What is a Director?

S. 250 CA’06 “ Director”

‘In the Companies Acts “ director” includes any person occupying the position of director, by whatever name called’

Every company must have at least ONE director

First Directors

Appointed at the time of incorporationTheir details must be specified in the

application documents sent to Companies House

Further Appointments

What do the Articles say?

What do directors do?

The powers of management – see the Articles of Association

Directors’ Duties

Ss.170 181 CA’06 for general duties; and

Ss. 188 – 226 CA’06 for specific duties requiring members’ approval

Pre CA’06

Directors were under a series of common law duties not to be negligent

• Not to make a secret profit• To avoid a conflict of interest• To act in the best interests of the

company

S. 171

Duty to act within the company’s powers

This means to act within the company’s constitution and to use powers ONLY for the purpose for which they were given

S. 172

Duty to promote the success of the company

This means directors must act in the best interests of the company for the benefit of its members

S. 173

Duty to exercise independent judgment

This means directors must act within the constitution but can tie themselves to work in a certain way should they wish

S. 174

Duty to exercise reasonable care and skill and diligence

This means a director must act with the skill reasonably expected of a person carrying out the function of director and with the knowledge skill and experience of this particular director

S. 175

• Duty to avoid a conflict of interest (unless authorised by the company)

This means a director must not place himself in a position where he stands to gain from a deal at the expence of the company

S. 176

Duty not to accept benefits from third parties that are likely to give rise to a conflict of interest

This means a director must act at all time impartially otherwise he must seek authorisation from the members

S. 177

Duty to declare interests in proposed transactions with the company likely to cause a conflict of interest with the company

This means the director must get authorisation from the other directors before the company enters into the transaction