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Mortaza E Chowdhury Section One 1.
Introduction InCompany Law Reform Bill started its life in the Parliamentary, which signifies the culmination of around 10 years of Law Commission discussions, consultations, representations, drafting and debate conducted by the Law Commission. A limited number of provisions came into effect on enactment with phased introduction of the majority on four key implementation dates: The enactment of the CA signifies the most important overhaul and consolidation of both common law and statutory provisions of the company law including perhaps the introduction of the most controversial and significant fiduciary duties of directors set forth in part 10, Chapter 2, ss However it was inaccessible to the directors as they often did not have legal backgrounds.
It is more relevant today because of the fact that we went through the worst financial crisis the world faced between and due to the irresponsible and cavalier lending attitude and the mispricing of the risk of the big corporations.
In simplest term it requires a director to act to achieve the objectives of the company. Section requires a director to make an independent decision, however it does not prohibit him using him will to enter into an agreement or from delegating his power. Section requires a director to exercise reasonable care, skill and diligence.
Section requires a director to avoid conflicts of interest. Section requires a director not to accept benefits from 3rd parties; and s requires a director to declare interest in any proposed transactions or arrangements. The Bribery Act created a legal framework to bring criminal prosecution against a company, director and individuals.
Fit for the Purpose In addition to the two key considerations under s namely a good faith, and b success of the company, directors also pay attention to several other factors including i long term consequences of their decisions, ii relationships with employees, iii customers relationships, iv community and environmental factors, v maintaining high standard of business conduct, and vi fair and equal treatment with the shareholders.
However the parliament gave particular emphasis on the duty of success. This new pragmatic approach that the directors would do whatever they consider is best for the company and its success thus bringing the company interest in line with the shareholders.
We well now consider the two key considerations. In other word the court applied subjective test. But the difficulty is that whatever a director has done to promote success, could not be impugned until it was proved that he did not have good faith belief in his approach.
Lord Goldsmith in an address to the House of Lords said that success would entail long-term increase in value. June at Is it fit for purpose? Worthington, Cases and Materials in Company Law, 8th edn. However directors may face several problems when they consider the factors set out in s 1.
First, how directors should respond when there are conflicts between the factors.
Perhaps they should dismiss them for overall success of the company. Some fear that directors may look into account their own interest while exercising balancing act. We have seen time and again that when directors acted in good faith, the court would not question directors action.
Perhaps directors will take into consideration interests of the stakeholders to promote success of the company so long it benefits the shareholders as well. Also it is difficult to enforce long term requirement as managers would prefer short term because of their temporary interests in the company.
Also short term approach seems to have favoured Anglo-American business environment in the past. The CL permitted directors to consider both short and long term approach in making decisions.
S appears to have been supporting the same view. While Shell took short term approach and reduced its skilled workers during economic crisis, BT seems to have taken long term approach and asked its staff to take long term holiday thinking that they could be reemployed when economy recovers.
P Taylor in empirical research found that the pressure on short term approach in favour of more long term approach had not been reduced since introduction of s Question: Critically discuss the fiduciary duties of company directors with reference to relevant case law and the provisions of the Companies Act Company directors are persons who are conferred with responsibilities to manage a company.
Historically, this had never been a major issue, but an increase in litigation against directors by third parties and increased regulation of listed companies led in to a relaxation in the rules governing the permitted scope of indemnities given by UK companies, rules which have now been consolidated within the Companies Act The Chapter 1 of this paper is amid to critically analyze that what are the duties and responsibilities of directors under Companies Act The duties of directors alone are of no importance if they cannot be fully enforced, the chapter 2 of this piece of work relates to the system of enforcement which provides the different kind of controls which gives assurance than how these duties of directors are implemented.
Secondary Legislation Impacted on Directors’ Duties Introduction of the Corporate Manslaughter and Corporate Homicide Act (CMCHA) made it possible to prosecute companies for serious management failure which resulted in 7 Note 1, see Chapter 3 of the CA 8 Ibid, see Chapter 4 of the CA 9 Ibid, see Chapter 5 of the CA equivalent duties at common law and in equity, in respect of any decision if Directors of a group of companies found to be trading whilst insolvent were partially operative companies scheme enacted by the Companies Act (Cth) ( Act).
The Act saw the introduction of . Advertising in schools ap essay grading dare to dream narrative essay adhunikta essay writing essay about courtly love poetry directors duties companies act essay the best day of my life essay words for said coming anarchy analysis essay pr database concept week 4 essay .