COMPANY MANAGEMENT DIRECTORS DUTIES PROBLEMQUESTION

Introduction Which Duties (s170) arise? The Duty is owed to the company this is contained in s170. S170 ss3 tells us that it is based on common law rules and equitable principles, this is because Ch 10 of the Act is codifying in nature. In order to understand how there duties should be interpreted however it is necessary to look to ss4 which suggests that regard must be had to the rules of common law and equity . S171: DUTY TO ACT WITHIN POWERS ie in accordance with the company constitution. Healy Hutchinson v Brayhead. Freeman Lockleyar v Buckhurst suggest that a breach of this duty means that there will be a corresponding duty to compensate the comapny. Re Smith and Fawcett also suggest that powers cant be used for a collateral purpose. S172: PROMOTE SUCCESS ss1 says that this must eb done in good faith that which is most likely to promote the success of the company. However we are not told what level of risk is prudent. IS IT A LARGE OR SMALL COMPANY??? Presently under a labour government the persuasion is likely to be towards the long term interest os the company. Cf GLOBAL FINANCIAL CRISIS OF 2008 where there were accusations of short terism. Have enlightended shareholder values been taken into account??

S173: INDEPENDENT JUDGEMENT is this really a defence or a duty? S174 REASONABLE CARE SKILL AND DILLIGENCE ss2a reasonably diligent person with their knowledge ss2b, is the correct standard. It s a dul objective subjective test. Re city Fire Insurance Co Romer LJ Pepole who willfully or negligently assisted a fraud are also liable.

Marad v El Saraj ***Foster v Bryant (2007): Arden and Ricks LJJ suggest ed that Boradman was too strict however this is unlikely to be followed because after all directors know what they re getting into! S176: Duty not to take bribes AG Hong Kong v Reed. Vgrineft v Abramovich (2008).Some people think that this has created a quazi subjective test TAKE INTO ACCOUNT THE SIZE OF THE BUSINESS!!! Re D Jan of London Dorchester Financle v Stebbing what is reaonsbale for that particular directors knowledge and Expereince/ S175 CONFLICTS OF INTEREST Boardmann v Phipps Regal v Gulliver Sinclair Investment Holdings v Versailles Trade Finance no 3 (2007) reaffirmed that money will be held on constructive trust. Has there been a breach? Is there an exclusion on exemption that would avoid liability? . **Hestinger v Wilson (2007). Daridond v Suland. Tesco v Pook.

What are the Consequences of breach? .