StudentShare solutions
Triangle menu

Company Director - Essay Example

Nobody downloaded yet
Normally, the directors of a company are not required to own any of its shares. Economists have analysed the problems, which may arise when the people managing a business do not own all of it. Managers in this position are believed to manage the business less efficiently than if they did own it.1
In broad terms the duties can be distilled into three propositions: Firstly, directors are under a duty to act bona fide in the interests of the company. Secondly, to exercise their powers under company's constitution for the proper purpose. Finally, to avoid conflict of interests and to profit from their position. For the first time, however, all the duties owed by directors to their company have been set out in statute, in Part 10 (ss.170-177) of the CA 2006.
Section 171 of Companies Act 2006 states that duty to act within powers. A director of a company must (a) act in accordance with the company's constitution, and (b) only exercise powers for the purposes for which they are conferred.
The constitution of the company is one or more documents setting out the rules by which the company is to be operated. While the constitution is subject to the Act, it sets out what powers directors have and how they are to exercise them. Directors must abide by these rules. If this power is given for one purpose, they cannot exercise it for a different proper purpose, even if they think that to do so would be in the best interests of the company.2

In Re Smith & Fawcett Ltd Lord Greene MR went to add that Directors must not exercise their powers for any "collateral purpose". This is called the proper purpose doctrine. The facts of Extrasure Travel Insurances Ltd v Cohen3, afford a clear illustration of a power being exercised for an improper purpose. More generally, however, the issue of whether Directors have used a power for a proper purpose arises in relation to their authority to issue shares. If shares are allotted in exchange for cash where the company is in need of additional capital the duty will not be broken. But where Directors issue shares in order to dilute the voting rights of an existing majority shareholder because he or she is blocking a resolution supporting, for example a takeover bid, then the duty will be breached.

The Privy Council in Howard Smith Ltd v Ampol Petroleum Ltd4 subjected the content of the duty to through scrutiny. The Directors allotted shares to a company, which had made a takeover bid. The effect of the shares was to reduce the majority holding of two other shareholders who had made a rival bid from 55 to 36 percent. The two shareholders sought declaration that the share allotment was invalid as being an improper exercise of power. The court held that it must be unconstitutional for Directors to use their fiduciary powers over the shares in the company purely for the purpose of destroying an existing majority, or creating a new majority, which did not previously exist.

Section 172 of Companies Act 2006 introduces significant change in common law. This Act states that duty to promote the success of the company. Section 172(1) a director of a company must act ...Show more


Before attempt to discuss this question it need to say that Companies Act 2006 does not contain a specific definition of the term "director". However, there is a general provision in section 250 of CA 2006, which states that the expression "director" includes "any person occupying the position of director, by whatever name called", which includes a person who is treated by the board as such despite not having been validly appointed…
Author : tateconnelly
Company Director essay example
Read Text Preview
Save Your Time for More Important Things
Let us write or edit the essay on your topic
"Company Director"
with a personal 20% discount.
Grab the best paper

Check these samples - they also fit your topic

In respect of a Director of a UK authorised service company and their obligations under FSMA 2000, the Criminal justice act and
Thus the purpose of the FSMA is to fill gaps left by the Criminal Justice Act 1993 (as amended) and the Companies Act 2006.2 The Companies Act 2006 regulates insider dealing by describing directors’ duties and forbidding directors taking advantage of information that they come across in the course of performing their statutory and common law fiduciary duties.3 The proliferation of statutory regulation of insider dealing is a manifestation of the fact that it has become increasingly obvious that it is unrealistic to trust that abusive corporate behaviour can be left to companies alone.4 The governance of insider dealing thus appears to be a significant preoccupation by the government and by
12 pages (3000 words) Essay
Company law
Teaming up with a rival company is also an action highly discouraged by law. This means that Muna has no legal power to defend the legal actions against him. He is not acting for the success of the company, which is the key objective of all directors (Banks & Banks, 2009).
4 pages (1000 words) Essay
The assignment - Background information - You are the financial director of a large, ficticious company called Manac plc, which
The issues come in different forms and impact the organization’s operation. However the common issues that a company has to deal with are financial constraints and intense competition within the industry (Sundararajan, 2005). In this context of the study, the company, Manac Plc is presently facing with issues pertaining to the target profits.
10 pages (2500 words) Essay
Company Law globalization
Too much of British company law frustrates, inhibits, restricts and undermines. It is overcautious, placing too high a premium on regulation and avoidance of risk. The company remains the choice of corporate vehicle for over a million businesses, and the core principles established by company law have served our economy well for over 150 years.
20 pages (5000 words) Essay
UK Company Law Assignment
Presumed authority is the authority that a third party assumes the agent to possess, notwithstanding the fact that such authority is absent. It arises, whenever, a principal's words or conduct apparently denotes the presence of such authority with an agent.
9 pages (2250 words) Essay
You have been recently appointed as Human Resource Managment (HRM) Director of a company which has recognised that it has problem with low workforce motivation
Human resource or employment policies help to establish corporate values, shape corporate culture and provide frameworks to promote consistent and equitable decisions on the management of employees. One of the important goals of human resource management in an
6 pages (1500 words) Essay
You have been recently appointed as Human Resource Managment (HRM) Director of a company which has recognized that it has a problem with low workforce motivati
This is because of individual differences and perceptions, which are highly personalized. Different employees will perceive the nature of a given prescription in different ways. Likewise, a given prescription may affect a given employee
8 pages (2000 words) Essay
You have been asked by your Managinet, you need to design, plan and delivg Director to develop a new market offering for your clothing company. Targeting the UK marker a new food offering into an already cluttered marketplace
ly caters to the youth market, between 18 and 34 years of age, who demand exclusivity in their clothing purchases with a modern flair to fit their less-resourceful budgets. In this highly saturated and competitive industry, fast fashion is the ability of a clothing company to
12 pages (3000 words) Essay
Your company is looking into sending an employee to a foreign country. Your company director is asking to prepare a consistent cross-cultural training and supports strategy for the employee. This plan should address the following information in a format o
In the global context management of human resources respond towards a complex and dynamic set of elements. It comprises of policies, practices and activities of attracting, developing,
13 pages (3250 words) Essay
Company Law
Directors then are the people who owe their service to the company or organization for the benefit of the members. They form the principle organ of management for any organization and carryout the major
8 pages (2000 words) Essay
Hire a pro to write
a paper under your requirements!
Win a special DISCOUNT!
Put in your e-mail and click the button with your lucky finger
Your email
Comments (0)
Click to create a comment
Let us find you another Essay on topic Company Director for FREE!
Contact us:
Contact Us Now
  • About StudentShare

  • Testimonials

  • FAQ

  • Blog

  • Free Essays
  • New Essays
  • Essays

  • The Newest Essay Topics
Join us:
Contact Us