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Directors Duties
Who is a Director?
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CA 2006 S250 – ‘director includes any person occupying the position of
director, by whatever name called
The definition of director relates to an individual with direct control over the
day-to-day management of the company
De facto directors – a person who acts in the role of director without ever
having been formally appointed as such
Shadow directors – persons on whose directions or instructions the company
is accustomed to act (CA 2006 251)
Model articles (3) – directors’ general authority – subject to the articles, the
directors are responsible for the management of the company’s business, for
which purpose they may exercise all the powers of the company
Gemma Ltd v Davies [2008] – G was the director of a building business and
his wife was the company secretary
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However,
the power to issue shares was a fiduciary power… and it was exercised for an
improper motive, the issue of these shares is liable to be set aside’
Guinness plc v Saunders [1991] – the directors of Guinness paid themselves
a ‘fee’ for a successful takeover of another company
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All of
the company’s shares were owned by two directors but, when one died, the
other refused to register the transfer of the deceased’s shareholding to his
son, offering instead to buy the shares from him
Held – such fiduciary powers must be exercised in the interests of the
company and there was nothing to show that they had been misused in this
case
Lord Greene MR – the principles to be applied… are, for the present
purposes, free from doubt [directors] must exercise their discretion bona fide
in what they consider – not what a court may consider is in the interests of a
company

S173 – Duty to exercise independent judgement
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The provision acts to prevent directors form restricting the future operation of
their discretion to exercise their judgement to act in the interests of the
company

S174 – Duty to exercise reasonable care, skill, and diligence
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The provision restates the duty of care and skill imposed on directors under
common law

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Dorchester Finance Co
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He was in breach of his fiduciary duty
CMS Dolphin Ltd v Simonet and another [2001] – a director of a marketing
company left his post to set up a competing business to which he transferred
many of the first company’s clients and much of its business
Held – Although there was nothing to prevent a director from resigning and
setting up another business, here the defendant had utilised information
gained as a result of the original directorship and had deprived the company
of ‘maturing business opportunities
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After
completion of the contact, U resigned from the company and, some time later,
obtained another contract from the Cameroon authorities
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IEF had not been
actively pursuing such an opportunity and U had not resigned to pursue such
an opportunity, therefore, no breach

S177 – Duty to declare interest in proposed transaction or arrangement
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Boston Deep Sea Fishing & Ice Co
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Unbeknown to the other directors, he took a secret commission from the ship
builders to award them the contract
Held – as a director had only been able to obtain commission because he was
a director he was liable to repay the commission to the company
Bowen LJ – ‘it is not that the money ought to have gone into the principles
hand in the first instance

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