2014年ACCA考试F4公司法与商法第十八章总汇2
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2 Directors' duties
2.1 General duty
(a) Directors must comply with the Companies Act and the general law. There are three primary duties:
(i) To exercise the degree of skill and care that might reasonably be expected from a person possessing the same degree of skill. (ii) Fiduciary duties:
1.To act honestly and in good faith and 2.The proper purpose rule.
(iii) A duty to comply with statutory requirements of CA and other relevant legislation. (b) A duty of disclosure to the company exists in relation to (ii) and (iii) above.
2.2 The duty of reasonable skill and care. (a) This is a common law duty.
It comprises a duty to manage the company: in accordance with its constitution in accordance with company law. (b) What is the standard required? – Not to act negligently.
– To demonstrate the skill and care of a reasonable man looking after his own business affairs.
Case law: Standard required first set down in Re: City Equitable Fire Insurance Co (1925):
(i) No greater degree of skill than may reasonably be expected from a person of his knowledge and experience;
(ii) Not bound to give continuous attention to company. (iii) May delegate duties.
(c) Standard refined by later case law: if director is an expert in a certain field a higher degree of competence is required. Eg. accounting or finance. Dorchester Finance Co Ltd v Stebbing.
2.3 Fiduciary duties
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(a) Directors owe fiduciary duties to the company. Their duty is like that of agent or trustee. Directors do not owe general fiduciary duties to individual shareholders employees or creditors although the common law and statute may impose duties in certain circumstances. Relevant provisions are considered post.
(b) The principal duty is to act bona fide in the best interests of the company. Company law views this as a requirement that directors should always act for the benefit of the company as a whole and not to further their own interest.
It prevents a director from using a corporate opportunity for his own personal gain. This would constitute a conflict of interest between the company and the director. (c) If a director is to make a profit he must account for it to the company. This involves disclosure to the company of any interest in company transactions. (d) This duty of disclosure is covered by case law. There are three keys cases illustrating the extent to which directors are caught by the duty:
(i) Cook v Deeks : Dishonest directors committing an intentional exploitation of corporate opportunity
(ii) IDC v Cooley : Director taking improper advantage of a corporate opportunity (iii) Regal (Hastings) : Honest directors unintentionally exploiting a corporate opportunity Ltd v Gulliver
However case law says a director may take up a corporate opportunity if the company has legitimately rejected it: Peso Silver Mines v Cropper.
(e) Directors must also act for a proper purpose eg in share issues: Howard Smith v Ampol Petroleum.
2.4 The duty of disclosure:
(a) A director is primarily accountable to the company. The duty of disclosure may be delegated to the Board as in table A.
(b) Disclosure must be made by directors of interests in contracts to be made with the company and of profit made as a result of transactions. (c) Disclosure requirements: (i) A full declaration is required.
(ii) It is either made to GM who can approve by ordinary resolution or under Art 85 of Table A to the Board.
In GM : Director can vote in their own favour. In Board Meeting : Director cannot vote. Will not count as quorum.
(iii) Effect of failure to comply: Contract is voidable by the Company. Directors may be personally liable to account to, or indemnify, the company.
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May also be held to be trustee of the proceeds on a constructive trust in favour of the company.
(d) In addition directors must comply with CA85:
(i) The rule is to prevent exploitation of your position as a director.
(ii) A general declaration is required, of interests in contracts to be made with the company and of profit made as a result of transactions.
(iii) It is made to the full Board, and not a subcommittee: Guinness Plc v Saunders. (iv) It is made at first meeting after director becomes aware of his interest. (v) Effect of failure to comply: contract is still valid but director is liable to a fine. (e) Duty of disclosure in accounts: What? All loans and property transactions. Any material interest. Not required:
– where interest is less than 1,000, or if more, is less than the lower of 5,000 or 1% of year end net assets. – if at arm's length.
2.5 The duty of statutory compliance
In addition to the disclosure duties directors are also bound to observe statutory limitations on their powers and to comply with statutory requirements before entering into certain types of contract.
All references are to CA 1985.
(a) Directors to have regard to interests of employees
– When performing their duties directors are to have regard to the interests of the company’s employees as well as its members.
– The actual duty however is owed to the company, and is a fiduciary duty enforceable by company as such. (b) Interests in contracts
(i) The aim of the statutory rule is to prevent exploitation of your position as a director. (ii) A general declaration only is required.
(iii) It is made to the full Board, and not a subcommittee: Guinness Plc v Saunders. (iv) It is made at first meeting after director becomes aware of his interest. (v) Effect of failure to comply: contract is still valid but director is liable to a fine. (c) Contracts of employment
– No longer than five years unless approved in GM or terminable by notice – Recorded in a Register.
– If greater than 6 month overlap between old and new both must aggregate at less than 5 years.
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If Table A applies a director must not vote on the terms of his own service contract. Copies of directors service contracts must be available for inspection at the Registered Office.
(d) Substantial property transactions
– Relates to contracts to transfer to, or receive from, a director a non-cash asset. – Companies Act defines this as being:
over 100,000 in value or exceeding 10% of company’s net assets whichever is the lowest.
Items under 2,000 can be ignored. – Prior approval by OR in GM required. (e) Interests in shares/debentures
– Interests must be disclosed to the company in writing – Recorded in a Register
– Failure to disclose: Director liable to fine or imprisonment. (f) Loans to directors (i) The CA 1985 applies to:
Loans: company lending money to a director eg. to buy personal goods, and to repay. Quasi loans: director incurs personal expenditure and company pays the bill. Credit: company supplies goods or services to a director on deferred payment terms. (ii) The rule:
All companies: Loans to directors are prohibited.
Relevant companies: Quasi loans and credit are also prohibited. ‘Directors’ includes connected persons. CA 1985 defines:
‘Relevant companies’ as plcs or private companies, part of a group in which one or more member companies is not a private company.
‘Connected persons’ as the spouse, child or step child of a director or a company in which the director holds 1/5 of the equity share capital or 1/3 of the voting rights. Exceptions
(iii) The exception and exceptions in general:
– Companies can lend to directors (not connected persons) provided the aggregate amount of the loan does not exceed 5,000.
– Companies can make loans to assist the director in the performance of his duties or to meet expenditure incurred on behalf of the company. Prior approval required by OR in GM or written resolution.
2.6 Exemption from liability for breach of duty
(a) Companies Act 1985 sets statutory limits on excluding directors' liability.
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(b) Cannot exclude liability or provide indemnity to an officer of the company or its auditors for liability arising from: Negligence Default Breach of duty
Applies to exclusions in: Articles
Any contract with the company. Company can insure against liability.
Officer of company can apply to court to relieve him of liability.
Application will be granted where officer has acted honestly and reasonably and ought fairly to be excused.
Fraudulent and wrongful trading.
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2014年ACCA考试F4公司法与商法第十八章总汇2
