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11 Cards in this Set
- Front
- Back
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What legislation are the 7 duties of a Director governed by? |
Section 171-177 Companies Act 2006 |
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What are the 7 duties of a Director? |
1. Act within powers 2. Promote the success or the company 3. Exercise independent judgement 4. Exercise reasonable care and skill 5. Avoid conflicts of interest 6. Not accept benefite from 3rd parties 7. Declare an interest in any proposed transactions |
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Who do directors owe a duty to? |
-The Company, not individual Shareholders. - Only Company can bring an action against them for breach of duty |
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Discuss: act within powers |
Director must act Intra Vires. ICSA Guidance note: Directors general duties- Directors should ensure that they comply with the constitution |
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Discuss: duty to promote the success of a Company |
Director should act in a way that is most likely to promote the success of a Company for tje benefit of its members. ICSA Guidance note: Director to have regard to: -long term consequences - interests of employees - relations with employees,customers,suppliers -impact of operations on community -reputation - Need to act fairly |
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Discuss derivative action |
- Shareholders can bring a derivative action under Section 260-264 of the Companies Act 2006 against directors for negligence or breach of duty. - A derivative action is brought in the name of the Company rather than shareholders |
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Discuss duty to exercise independent judgement |
Applies to all Directors - exec and non exec. ICSA guidance note on directors general duties: - Directors to not let personal interests affect judgement - execs to not attend meetings to promote a collective executive line - should give their independent opinion - directors representing interests should set representative functions aside and make decisions on own merit |
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Discuss: duty to declare an interests in proposed transactions/ arrangement / conflict of interest |
Companies Act 2006: 3 situations where a conflict of interest might arise. 1. When company not party to a contract but Director gains peesonally from exploitwtion od property, information or opportunity. 2. Proposed transaction/ arrangements that a company may become a part of. If a Director has direct/ indirect personal interests, must disclose it before company enters into the contract. 3. Criminal offence for a Director to not make/ update declarations of interest in any arrangement which a company is party |
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What is D&O Liability insurance |
Director and Officer Liability Insurance. - insures Directors against legal costs incurred defending legal action against them for negligence/ breach of duty |
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Duties of Directors RE D&O Insurance |
Directors to require company to provide them with insurance cover for Directors/ officers liability |
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What should Directors satisfy themselves with in terms of D&O liability insurance? |
Directors should be satisfied that a Company insurance policy provides sufficient cover in terms of potential costs and all eventualities |
