Question

5. Explain, using relevant case law, the legal scope and purpose, of Directors Duties under the Companies Act 2006.

Answer 1

Companies Act has a dedicated set of sections to elaborate upon the duties of the directors in a company. The sections 171 to 177 have a comprehensive elaboration about the ways in which directors are required to perform in the company. These sections lay down the specific scope and purpose of the role of directors in the company.

· Duty to act for proper purposes: As per this duty which has been laid down under Section 171 of the Companies Law, the directors are required to behave in the best interest of the company. The directors are required to abide by the constitution of the company while performing their duties.

· Duty to promote the success of the company: The directors must act in a way that their behavior facilitates the success and overall growth and development of the company. This duty has been laid in section 172 of the Companies Law.

· Duty to use independent judgement: The directors are given the power to give judgement independently regarding business decisions, and not be scared or under influence of any power.

· Duty of care and skill: Under section 174, the directors are given the duty of reasonable care for the company as well as its overall employees and assets.

· Duty to disclose interest: The directors are required to disclose their interest, towards a proposed business decision or transaction. This helps in keeping the power of the directors in check.