This this has now been surpassed by the Corporation

This statement
requires an extensive analysis of Directors duties in English Company Law.

Along the lines of this analysis the core concepts surrounding directors’
duties such as the codification of directors’ duties and s.172 which has
arguably made one of the most significant changes in the Companies Act 2006,
will be highlighted. This will thus help to give an understanding on whether
the introductions of directors’ duties into the Companies Act has either just
simply codified the existing common law or if it has gone beyond that and has
clarified or improved this area of the law and how stakeholder’s interests are
impacted in English Company Law.

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The modern day Companies
Act is the primary source of legislation used in UK Company Law. It replaces
the Companies Act 1985 and it it used to be the longest Act of Parliament
established with 1,300 sections1,
however this has now been surpassed by the Corporation Tax Act 2009. The definition of director is present
in s.250 as including ‘any person occupying the position of a director, by
whatever name called’. As highlighted in Re Hydrodan (Corby) Ltd (1994), there
are three different types of director; de jure (formally appointed and
registered as a director),2
de factor (not formally appointed but carries out all the duties and decisions
as a director)3 and
shadow directors (person in accordance with those directions or instructions
the director of the company are accustomed to act).4
Every company must have at least one director, however public companies must
have at least two directors.5
In order to address agency problems and reduce agency costs, it is vital that
directors do not misuse their power, therefore directors in both private and
public companies are subjected to various duties. Directors only owe their duties
of loyalty to the company and not to individual shareholders, as reinforced by
s.170(1).6
Directors are also considered as a company’s trustees or agent and are in a
fiduciary situation in relation to the company.7
Furthermore, they must first and foremost act in good faith and in the best
interests of the company.8
Even before the codification of directors duties where implemented within the
Companies Act, directors still owed the duty of care and skill to the company.9

 

The Law Commission recommended
that the complicated law on directors’ duties relevant to equitable attitudes
and at common law should be reformed and made simpler by using a statutory form.10
It evaluated

1 Boyle,
A & Bird, J (2007) Boyle & Birds Company Law (7th edn)
Bristol:Jordans

2 Ma, F. (n.d.). Company
law. 2nd ed. University of Portsmouth: Pearson.

3 ibid n.2

4 S.252 Companies Act 2006

5 S.154 Companies Act 2006

6 Pervial V Wright (1902) 2 CH 421

7 Bristol and West Building Society V Mothew (1998)

8 Pervial V Wright (1902) 2 CH 421

9 Re City Equitable Fire Insurance Co Ltd (1925) Ch 407

10 Law Commission (1998) Company Directors: Regulating Conflicts of
Interests and Formulating a Statement of Duties (Consultation, Paper No.153)
London: The Stationery Office

 

 

This statement
requires an extensive analysis of Directors duties in English Company Law.

Along the lines of this analysis the core concepts surrounding directors’
duties such as the codification of directors’ duties and s.172 which has
arguably made one of the most significant changes in the Companies Act 2006,
will be highlighted. This will thus help to give an understanding on whether
the introductions of directors’ duties into the Companies Act has either just
simply codified the existing common law or if it has gone beyond that and has
clarified or improved this area of the law and how stakeholder’s interests are
impacted in English Company Law.

We Will Write a Custom Essay Specifically
For You For Only $13.90/page!


order now

 

The modern day Companies
Act is the primary source of legislation used in UK Company Law. It replaces
the Companies Act 1985 and it it used to be the longest Act of Parliament
established with 1,300 sections1,
however this has now been surpassed by the Corporation Tax Act 2009. The definition of director is present
in s.250 as including ‘any person occupying the position of a director, by
whatever name called’. As highlighted in Re Hydrodan (Corby) Ltd (1994), there
are three different types of director; de jure (formally appointed and
registered as a director),2
de factor (not formally appointed but carries out all the duties and decisions
as a director)3 and
shadow directors (person in accordance with those directions or instructions
the director of the company are accustomed to act).4
Every company must have at least one director, however public companies must
have at least two directors.5
In order to address agency problems and reduce agency costs, it is vital that
directors do not misuse their power, therefore directors in both private and
public companies are subjected to various duties. Directors only owe their duties
of loyalty to the company and not to individual shareholders, as reinforced by
s.170(1).6
Directors are also considered as a company’s trustees or agent and are in a
fiduciary situation in relation to the company.7
Furthermore, they must first and foremost act in good faith and in the best
interests of the company.8
Even before the codification of directors duties where implemented within the
Companies Act, directors still owed the duty of care and skill to the company.9

 

The Law Commission recommended
that the complicated law on directors’ duties relevant to equitable attitudes
and at common law should be reformed and made simpler by using a statutory form.10
It evaluated

1 Boyle,
A & Bird, J (2007) Boyle & Birds Company Law (7th edn)
Bristol:Jordans

2 Ma, F. (n.d.). Company
law. 2nd ed. University of Portsmouth: Pearson.

3 ibid n.2

4 S.252 Companies Act 2006

5 S.154 Companies Act 2006

6 Pervial V Wright (1902) 2 CH 421

7 Bristol and West Building Society V Mothew (1998)

8 Pervial V Wright (1902) 2 CH 421

9 Re City Equitable Fire Insurance Co Ltd (1925) Ch 407

10 Law Commission (1998) Company Directors: Regulating Conflicts of
Interests and Formulating a Statement of Duties (Consultation, Paper No.153)
London: The Stationery Office

 

 

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