Directors’ Duties

The general duties imposed upon directors are the corollary of their powers; they spring from the directors’ functional and normative role in conducting the company’s affairs and affecting its legal relations. Corporate law and the constitution of the company repose in them powers to act, within certain bounds, in the company’s name. And in doing so, they necessarily affect all those interested in the company’s fortunes: most fundamentally, its members. The separate legal personality afforded to a company serves, for the purposes of legal analysis, as a nexus for its members’ interests, and makes it possible to describe directors in the exercise of their powers as agents for the company. These tenets explain the origin of some of the basic duties that apply to directors in relation to the exercise of their functions: to promote the interests of the company; to exercise reasonable care, skill, and diligence; not to exceed the limits of their powers; not to profit from their position; and not to place themselves in positions where their own interests or other duties conflict with their duties to the company. In doing so, they draw on equitable and common law principles of wider application, to agents, trustees, partners, and professionals.

Just and Equitable Winding Up

Ever since the Companies Act 1862, successive Companies Acts have made provision for companies to be wound up on just and equitable grounds.

Introduction

Shareholders—the members of a company—associate on terms and subject to constraints (in part elective and bespoke, in part mandatory and of general application) set out in constitutional documents such as the company’s articles of association and resolutions, in any separate agreements between the shareholders, and in relevant general law, whether statutory in origin, or derived from the principles of common law and equity.

Unfair Prejudice: Remedies and Valuation

If the court is satisfied that a petition under [CA 2006, Part 30] is well founded, it may make such order as it thinks fit for giving relief in respect of the matters complained of.

Companies ACT 2006, Section 994 Petitions: Procedure

If a member who presents a 994 petition fails to act reasonably and proportionately prior to the commencement of the proceedings, his conduct is a matter which the court may take into account when considering the question of costs.

Unfair Prejudice: The Statutory Remedy

Introduction: The Statutory Provisions The Companies Act 2006 (CA 2006), s 994(1) provides: A member of a company may apply to the court by petition for an order … on the ground.

Rights Conferred on Shareholders by the Companies ACT 2006

Rights are conferred on individual shareholders by a number of provisions in the Companies Act 2006 (CA 2006). These rights may be enforced by an individual shareholder free of any restrictions under the rule in Foss v Harbottle. The principal rights concerned are:

Derivative Claims

The distinction between the personal rights of the shareholder and the rights of the company is fundamental to the concept of minority shareholder protection.

Foreign Aspects

This chapter considers the availability of relief where the company is not incorporated in England or Wales, and examines the principal problems which can arise where some of the parties are located out of the jurisdiction.

Personal Claims

Where the shareholder seeks to enforce rights vested in him personally, the rule in Foss v Harbottleis inapplicable. This was emphasized by Asquith LJ in Edwards v Halliwell: