Company 2

Front 1

What or who is a Company Director?

Back 1

(i) directors do not have to be shareholders;

(ii) directors act in a collective way through the board of directors;

(iii) board meetings are conducted pursuant to the articles, and with “majority rule”applying;(iv) directors meet periodically, and so are not involved in the management of thecompany on a daily basis; and

(v) directors delegate their powers to the “executive officers” of the company.

- Includes:(i) a “shadow director”: not an “official” director, but someone whose directionsboard “accustomed to act” in accordance with: s 251 CA 2006 [s 741 CA 85] and(ii) a “de facto director”: not an “official” director, but acts as if a director. *Smithton Ltd v Naggar [2014]

Front 2

How are directors appointed?

Back 2

Usually, directors are appointed by shareholders at a general meeting of thecompany.

Front 3

What is the minimum number of directors a company can have?

Back 3

A public company must have no less than 2 directors; a private company musthave no less than 1 director

Front 4

What age does a director have to be?

Back 4

over 16

Front 5

What are the main types of director?

Back 5

- Managing director - usually power to appoint in articles

- Executive directors - involved in a business’ “day-to-day” management. - often have a service contract with the company.

- Non-executive directors - attend board meetings, but not involved in thecompany’s daily running. Usually, act as a check on the executive directors.In public companies, they are, normally, involved in determining the executivedirectors’ remuneration.

- “Chairman” – appointed by “the directors … to chair their meetings”.

Front 6

Where can the general duties of a director owed to his company be found?

Back 6

The Companies Act s171-177.

Front 7

What is the fiduciary duty that a director owes to his company?

Back 7

The duty to act in good faith in the best interests of the company. Includes the "no conflict of interest" rule, where by a director must not act in such a way as to to permit a conflict of interest between what might benefit him and what might benefit the company.

Front 8

What is the duty of skill and care that a director owes to his company?

Back 8

The duty to run the company competently and with, as a minimum, the care and attention that a normal person would exercise when running his own business.

Front 9

What happens if a director fails to exercise his fiduciary duty, if he breaches the no-conflict rule or if he manages the company negligently?

Back 9

The company may sue him for breach of his duty to it.

Front 10

What is the general law position and that under the 2006 Act re directors duties?

Back 10

General Law: Generally, at common law, duties by directors owed to thecompany, not to company’s members individually. Percival v Wright [1902]*Dawson International v Coats Paton [1988]*Peskin vAnderson [2001].

: S 170 CA 2006 – “Scope and nature of general duties” – “the generalduties in ss 171-177 CA 2006 are owed by a director of a company to thecompany”. These duties are now applicable to “shadow directors”: s 170(5) CA2006.

Front 11

How does the company's constitution limit the directors duty to act?

Back 11

s. 171 says the director has a duty to act within powers in the companies constitution.

Front 12

Percival v Wright [1902]

Back 12

Historically, while directors might be expected to owe various duties to the collective body of shareholders (i.e. company as a whole), there was no specific duties to individual members.

Front 13

Dawson International v Coats Paton [1988]

Front 14

Peskin v Anderson [2001]

Front 15

Where can the duty to promote the success of the company be found?

Back 15

s 172 CA 2006

Front 16

Why is the issue of "good faith" problematic?

Back 16

The general view seems to be that if the director does something that he genuinely believes to be in the best interests of the company and has taken the trouble to satisfy himself as to the correctness of his decision, even if it not one which other directors might agree, it is not for the court to deny. However, there may be occasions when it strains credulity to believe that a director could reasonably believe that a director could reasonably believe that he was acting in good faith.