Director's Duties
S172 promote the success of the company The most reformative Re Smith
S170
Reasons of CA06
Objectives of CA06
S176 not to accept benefits from third parties
S175 avoid conflicts of interests
S170(1) owed to the company Percival case
S172(1) act in good faith benefit members
SUBJECTIVITY the director's honesty matters but not a good or reasonable business decision Howrd Smith case
Act remedy this
criticism on common law over prioritized the interest of the company and its shareholders may damage others' benefits
suppliers and customers
long term interest
the community and the environment
the reputation of the company
between the different members
S171 act in accordance with the company’s powers
Do permitted things under constitution
act in accordance with the company’s constitution
only exercise power they are conferred Howard Smith case
S173 exercise independent judgment not to fetter their discretion Re Englefield restrict discretion if in the best interest Fulham Football Club Ltd
S174 exercise reasonable care, skill and diligence Lord Hoffman: Norman case and Re D'Jan of London
employees
New criticism interets above may conflicts
new ‘enlightened shareholder approach’
Twofold test: the duty of care owed by the director is the same as the care that would be taken by a reasonably diligent person Re Barings Bank plc
the objective test:knowledge,skill and experience a reasonably diligent person expecting
the subjective test:the director
Common law
No conflict rule
No profit rule
Codification: Avoid a director's interests conflict with the interest of the company
‘corporate opportunity’ doctrine:A director will breach the duty if he takes corporate's opportunity Bhullar
S177 declare interest in proposed transactions or arrangements
Soften: Under disclosure or authorization of directors can make a profit
S182 Disclose interets in existing transactions or arrangement
Case law unclear, inaccessiable, difficult to understand
based on the old equitable principles of law relating to trustee duties,developed mainly from the law of negligence
Difficult for directors to identify,out-dated
codified to provide clarity and accessibility
alter and modernize law
provide a full codification of the duties and a clearer statement
S170(4) ‘regard shall be had’
S170(3) the provisions apply ‘in place of’ the old law
S179 the duties are cumulative: S174 and S173 overlap
not exhausitive
the standard of care is subjective Re City Equitable Fire Insurance Co Ltd but not terribly rigorous: Re Cardiff Savings Bank
an objective minimum standard of care,raised on a subjective basis