Company law Dissertation Example | Topics and Well Written Essays - 14250 words

Company law - Dissertation Example Such intrusion takes place, only when it is evident that there is mala fide intent in the decisions of the directors. This is in accordance with section 306 of the Companies Act 2006. Although, section 172(1) of the Companies Act 2006 influences the general duties of the directors of a company; it has been seen to result in legal uncertainty, regarding their general duties. This is due to the absence of an exhaustive list of the duties to be discharged by the directors. Apparently, this bestows widespread discretionary powers upon directors. This wide discretion has been provided by the statute for the purpose of conducting the affairs of the company in a congenial manner. However, under certain circumstances, such discretionary power can be misused by the directors of a company, in order to further their personal interests. This had transpired in Hawkes v Cuddy & Others.1 A codification of some of the duties of the directors of a company was effected by the Companies Act 2006. Insta nces are the codification of the common law duty of care and skill, by section 174(1) of the Companies Act 2006. A very important feature of the codification of directors’ duties relates to the fact that not all of the directors’ duties have been codified.2Directors’ duties codified by the Companies Act 2006 are their principal fiduciary duties and the duty of care and skill. ... ector is required to comply with all of these duties.3 It is apparent from the various law reports that section 172 of the Companies Act 2006, merely effects a codification of the obligations of directors under the common law. In Re Southern Counties Fresh Foods Ltd,4 the court made a comparison between the previous wording and the new form after codification.5Prior to the 2006 Act, there was no material difference in this position. This was clarified in Re Smith and Fawcett Ltd.6 The shareholders of a company can sue a director of their company, for breach of duty towards the company.7 Prior to the enactment of the Companies Act 2006, shareholders had to obtain the permission of the board of directors of their company, if they were desirous of initiating legal action against a director of their company. This inequitable situation was rectified to some extent, subsequent to the enactment of the Act, which permits shareholders to bring in derivative action against a director of their company. It is no longer necessary to obtain the prior permission of the board of directors of the company, to bring such derivative action. The business judgement rule absolves directors of liability for the decision taken by them, if these decisions had been taken in good faith, with due care and within their powers.8 A director’s liability will be absolved, if he had taken the concerned decision with due care and diligence. However, there is every possibility that the director may exceed the limits of his authority, in taking such decisions. In Lonrho Ltd v Shell Petroleum Co. Ltd 9, the House of Lords stressed upon the importance of the duty of directors towards the company. In Re Horsley & Weight Ltd 10 it was held that the directors owed a duty towards creditors. This was a novel