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Directors' Duties

FROM £112.50

Fresh examination of directors' duties in light of codification under the Companies Act 2006, explaining the role of directors within the corporate governance process

  • Published: January 2014
  • Edition: 2nd
  • Format: Hardback / eBook (ePDF) / eBook (ePub) / Online
  • ISBN: 978 1 84661 826 0
  • Authors/Editors: Professor Andrew Keay
  • Category: Company Law
Directors’ Duties provides an analysis of the general duties of directors contained in Chapter 2, Part 10 of the Companies Act 2006.

The new edition is completely updated to include:

  • A new part on what might constitute a breach of s 172(1) with consideration of relevant cases
  • Expanded chapter dealing with the duty to take into account the interests of creditors (s 172(3)) and consideration of how directors are to discharge their duty
  • More on remedies in light of the decisions of the Court of Appeal in Sinclair Investments v Versailles Trade Finance and FHR European Ventures LLP v Mankarious
  • Expansion of the discussion on ‘good faith’ in relation to s 172(1)
  • Court of Appeal decision in O’Donnell v Shanahan dealing with corporate opportunities
  • Recent cases dealing with derivative actions
  • Australian case of ASIC v Healey and its impact on the duty of care
  • Discussion of de facto and shadow directors in light of recent decisions
  • Bell Group v Westpac Banking litigation as far as the proper purposes duty is concerned
  • Consideration of bribes in light of the decision in Sinclair Investments v Versailles Trade Finance
• Introduction
• Directors: Background and Role
• Directors in the Corporate Governance Process
• Codification of Duties
• Duty to Act with Powers
• Duty to Promote the Success of the Company
• Duty to Exercise Independent Judgment
• Duty of Care, Skill and Diligence
• Duty to Avoid Conflicts
• Duty not to Accept Benefits
• Duty to Declare Interests
• Duty to Consider the Interests of Creditors
• Derivative Proceedings
• Consequences of Breach (including relief)
• Ratification of Breaches of Duty
• Judicial Excusing of Breaches
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"The book is a crucial addition to applied corporate governance, especially given the scarcity of similar titles that situate the law and practice of directors’ general duties in its legal, commercial and economic context. It is a primary source of information for practising company and commercial law solicitors, barristers, corporate management and legal academics, as well as an excellent point of reference for postgraduate students."
Journal of Business Law
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"The book thus works well as an introduction to the subject for readers approaching it with no prior knowledge, and as a comprehensive reference drawing together a range of primary and secondary authorities (with insightful critical and comparative elements) for readers who are more conversant with this area of law. Although the back cover indicates that the book is invaluable for solicitors, barristers, in-house lawyers, company secretaries and administrators (presumably in keeping with the publisher's outlook), it is a worthy addition to undergraduate and postgraduate company law reading lists...It is very much to his credit, Andrew Keay has succeeded in producing a student-friendly book"

Blanca Mamutse, University of Aston
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"this carefully researched and copiously footnoted book should be considered an essential purchase for company directors ... All readers, whether lay or professional, will find the book an excellent research resource ... In all, the book will certainly be an invaluable addition to the professional library."

Phillip Taylor and Elizabeth Taylor of Richmond Green Chambers
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"An up to date, well written and easily accessible source of information for company directors and everyone who advises company directors or who has an interest in this field"
German-British Chamber of Industry & Commerce
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"the commentary is thorough and excellent...The chapter on derivative proceeding also deserves special mention for its user friendly explanation of the not uncomplicated law and practice.
All in all, a very useful store cupboard textbook, which will no doubt continue to be popular and oft cited as the case law develops further under the Companies Act 2006."
Bree Taylor, Partner, Memery Crystal LLP

Reviews from the previous edition

"every director should be required to read this publication irrespective of the size of the company ... [we] can thoroughly recommend this as a very practical book"
International Company and Commercial Law Review

"well-structured ... an excellent source to gain a first impression of directors' duties but also to deepen one's knowledge"
German-British Chamber of Industry & Commerce

"A dedicated and comprehensive guide to navigating this minefield of uncertainty for directors and their legal advisors ... a valuable addition to the literature on the subject and should be a staple of any company law collection"
John Tribe, KPMG Lecturer in Restructuring, Kingston Law School

“A must-have for those engaged with directors duties … the diversity of expert opinions adds to the quality of the book … also of no lesser value to corporate law practitioners; from in-house to ex-house lawyers and corporate and practising accountants”

Business Law Review
When the first edition was published, the Companies Act 2006 was in its infancy and the provisions of it that codified the duties of directors had not been put in force much before publication of the book. Since then while we have not had much in the way of case-law on some provisions, what case-law we have got indicates clearly that the courts will apply, where possible, the law extant at the time at which the codified provisions came into operation. Certainly the courts have followed section 170(5) and interpreted and applied the duties in the same way as common law rules and equitable principles and regard has been had to the corresponding common law rules and equitable principles in the interpretation and application of the codified duties.

Most chapters of the book have been expanded and some, such as chapters 5, 13, 14 and 15 and parts of Chapters 6, 8, and 9, significantly so. This has been due to the cases that have been decided in the areas covered by these Chapters. I have considered or mentioned all relevant cases decided since the publication of the last edition, including the English cases of O’Donnell v Shanahan, Sinclair Investments v Versailles Trade Finance, Paycheck Services, Re UKLI Ltd, McKillen v Misland and GHLM Trading Ltd v Maroo. Also, I have dealt with some of the more relevant and important Commonwealth cases such as the litigation in Bell Group v Westpac Banking in Western Australia, ASIC v Healey (the Centro litigation) and Buzzle Operations.

I am thankful to my very supportive colleague, Joan Loughrey, for permitting me to draw on a couple of papers that we wrote together, namely ‘Derivative Proceedings in a Brave New World for Company Management and Shareholders’ [2010] JBL 151 and ‘An assessment of the present state of statutory derivative proceedings’ in J Loughrey (ed) Directors’ Duties and Shareholder Litigation in the Wake of the Financial Crisis (Cheltenham, Edward Elgar, 2013), Chapter 7. I am also thankful to her for the fact that many of our discussions on directors have probably helped to shape some of the pages of this volume.

I thank Mary Kenny and Kate Hather from the publisher for their work relating to this book, and for the editing assistance of Claire Banyard.
I have sought to state the law as at 30 August 2013, but at the proof stage I have been able to include some reference to cases decided after that date.

Andrew Keay,

Professor Andrew Keay,
Professor of Corporate and Commercial Law, and Director of the Centre for Business Law and Practice, School of Law, University of Leeds

IV The interpretation of the section
A Introduction

In a way, the first part of the section codifies, although the terminology has changed, the established common law rule that directors must act in good faith for the benefit of what they believe are the interests of their company. The task of the directors is to promote the success of the company, and this obviously means they are to advance and foster the company’s aims and objectives.

In Cobden Investments Ltd v RWM Langport Ltd (sub nom: Re Southern Counties Fresh Foods Ltd), Warren J said that: ‘The perhaps old-fashioned phrase acting “bona fide in the interests of the company” is reflected in the statutory words acting “in good faith in a way most likely to promote the success of the company for the benefit of its members as a whole”. They come to the same thing with the modern formulation giving a more readily understood definition of the scope of the duty.’ In Madoff Securities International Ltd (in liq) v Raven Popplewell J said that the section codified the common law…

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