Company Law Assignment
Directors have powers to take majority business decisions on behalf of companies. Under the present rules, directors’ duties are enshrined in the common law rules and equitable principles as well as in statutes such as the Companies Act 1985 as amended by Companies Act 1989.
It is considered that these principles lack certainty and are not easily accessible. Quite often, directors usually have to take advice in these kinds of areas so that they do not accidentally breach any duty enshrined in the case law. Therefore the government believes that codification of directors’ duties will make law in these areas more consistent as well as accessible. The Companies Act 2006 codifies directors’ duties into a statutory statement of seven general duties (s171-177).
S171 of the Companies Act 2006 states that a company must act in accordance with the company’s constitution and only exercise powers for the purposes for which they are conferred. S171(b) is based on the equitable principle in that a director of a company has a duty to exercise the company’s powers for the purposes for which they were given. Directors of a company also have authority to exercise all of its powers in the management of the company’s business under the mode articles of association in SI 2008/3229. An exercise of a power for a purpose which is outside the purposes for which the power has been given is voidable. In the Bennett’s Case Turner LJ stated “....in the exercise of powers given to them...[directors] must, as I conceive, keep within the proper limits. Powers given to them for one purpose cannot...be used by them for another and different purpose. To permit such proceedings on the part of directors of companies would be to sanction not the use but the abuse of their powers”.
The limits on the exercise of power may be found in the articles of association. However in advance it is not possible to lay down the limits beyond which directors may never pass in exercising a particular power. Every
It is considered that these principles lack certainty and are not easily accessible. Quite often, directors usually have to take advice in these kinds of areas so that they do not accidentally breach any duty enshrined in the case law. Therefore the government believes that codification of directors’ duties will make law in these areas more consistent as well as accessible. The Companies Act 2006 codifies directors’ duties into a statutory statement of seven general duties (s171-177).
S171 of the Companies Act 2006 states that a company must act in accordance with the company’s constitution and only exercise powers for the purposes for which they are conferred. S171(b) is based on the equitable principle in that a director of a company has a duty to exercise the company’s powers for the purposes for which they were given. Directors of a company also have authority to exercise all of its powers in the management of the company’s business under the mode articles of association in SI 2008/3229. An exercise of a power for a purpose which is outside the purposes for which the power has been given is voidable. In the Bennett’s Case Turner LJ stated “....in the exercise of powers given to them...[directors] must, as I conceive, keep within the proper limits. Powers given to them for one purpose cannot...be used by them for another and different purpose. To permit such proceedings on the part of directors of companies would be to sanction not the use but the abuse of their powers”.
The limits on the exercise of power may be found in the articles of association. However in advance it is not possible to lay down the limits beyond which directors may never pass in exercising a particular power. Every
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