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Company Law: Company Law Reform Bill - Essay Example

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Company Law: Company Law Reform Bill

The main proposals in respect of the Directors' duties include: a statutory statement of directors' general duties; and an extended power for shareholders to sue directors for negligence and other defaults. Presently the general duties that a director owes to the company were invariably established though case law rather than statute making it difficult for such duties to be comprehended and pressed for implementation. The Bill includes a statutory statement of directors' general duties both to make the law in this area more accessible and to change the law where it no longer corresponds to modern business practice. The clauses 170-187 of the Companies Bill 2006 carry a major portion of such codification Other changes are made which affect directors, including simplification of the law relating to transactions between a company and its directors. This paper would discuss the changes brought about in the new legislation in respect of directors' duties and how these changes present an altered and improved stance over the hitherto adopted practice of deriving directors' duties through interpretation of case laws.
The governments intended to plain speak on the directors' duties so ...
On the issue of the liability of directors, the governments Government recognised that the law has to balance the need to deal fairly with directors who have been negligent or dishonest against the need for companies to have a diverse pool of high-quality candidates wishing to act as directors, and who are willing to take informed and rational risks. The Bill implements a Law Commission recommendation making it easier for shareholders to sue directors for negligence, default, breach of duty or breach of trust - a broader range of conduct than at present.1.The various duties envisaged in the new bill can be cited as follows: Duty to act within the company's powers i.e. "A director must act in accordance with the company's constitution and only exercise powers for the purposes for which they are conferred."- this codifies the common law rules that directors should exercises their powers under the terms that were granted for a proper purpose. A director's powers are normally derived from the company's constitution, i.e. its memorandum and articles of association.; Duty to promote the success of the company i.e. "A director of a company must act in the way he considers, in good faith, would be most likely to promote the success of the company for the benefit of its members"- this duty is set out in section 172 of the Act and is a new duty developed from one of the heads of the overriding principles of the fiduciary duties, i.e., duty of good faith to act in the company's best interest. when exercising this duty the director is required to have regards to various non-exhaustive list of factors listed in s.172 (1) including the long term consequence of the ...Show more

Summary

The Companies Bill (earlier popular as the Company Law Reform Bill) is a major step towards extensive reform of UK company law. The government considers that these principles while long established lack certainty and are not easily accessible. Very often, directors have to take advice in these areas so as to ensure that they do not inadvertently breach any duty enshrined in the case law…
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Company Law: Company Law Reform Bill essay example
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