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Directors Duties - Coggle Diagram
Directors Duties
Duties
170(1) - owed to the company (not shareholders) as per Foss v Harbottle
When in financial difficulty, shifts to creditors
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174 exercise reasonable care, skill and diligence
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177 declare an interest in proposed transaction/arrangement
To the other directors
Lee Lighting - need not be in writing, informal notice will suffice
If complied with, transaction not liable to be set aside under 180
If breached, consequences under 178
Risky transactons
Substantial property transactions
Transactions between company and directors or connected persons concerning 'substantial non-cash assets'
Substantial = 191 exceeds 10% of company's asset value and more than 5k OR exceeds £100k
Need shareholder approval (ordinary res)
Voidable if not
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Directors long term service contracts
188 where a service contract provides for director's employment for a guaranteed term which is, or may be longer than, 2 years
Need shareholder approval (ordinary res)
Company can terminate at any time on reasonable notice
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Remedies
260 - derivative claim
Brought by shareholders on behalf of a company where directors have breached duties
Relief granted to company (not shareholders) - account for profits, rescission, damages, injunction
Relief
175 / 180 - prior consent or approval by shareholders
Provided full disclosure to shareholders (Sharma)
239 - ratification by shareholders
After the breach
Resolution disregarding the votes of the director in question
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Relief granted by court
HCL Environmental - if acted honestly and reasonably and, having regard to circumstances, ought to be excused