Introduction
A company is an artificial person which cannot perform on its own. It requires real people to represent it and act on its behalf. The directors are like the back bone of a company. Their decisions and their performance are very valuable for the company. At the same time much of their duties are reflected upon the shareholders, employees as well as the creditors. This relationship between directors and members is of great importance.1 The law on directors’ duties was not properly codified in a statutory form before the Companies Act 2006 came into force. The issue of restating directors’ duties in a statutory form caused considerable controversy and created a lot of debate. It was an important issue which was considered by the Law Commission in their joint report, Company Directors: Regulating Conflicts of Interests and Formulating A Statement of Duties (Nos 261 and 173, respectively). The Law Commission seriously wanted to restate directors’ duties in a statutory form.2 It was seen later that many people were against this view and they felt that this will lose the flexibility of a company while those who supported this view found that it will bring certainty and accessibility. The dissertation will consider the flaws which the previous law had and how the Companies Act 2006 has made the law more accurate and easy to understand. It will also consider that such a legislative approach was actually needed to improve the standards of corporate governance. In the following chapters it would be seen how the new Companies Act 2006 works. In doing so a clear analysis would be drawn by showing the change in law by comparing and contrasting the old common law on directors’ duties. Most importantly the emphasis on corporate opportunity would be given in this context. In the final chapters the present situation after the enactment of the Companies Act 2006 will be discussed. This mainly deals with the behaviours of the Courts and how they are treating the new Companies Act 2006. Finally my own recommendations about the change in law and recommendations from some authors will be widely discussed.
1.1 Purpose and objective of this dissertation
The purpose and objective of this dissertation is to clearly illustrate the fact that the old common law principle of directors’ duties was very complicated and the law really needed a change. The analysis between the old common law and the new Companies Act 2006 will help to solve the issues and how the law has now become clearer and readily accessible. It also has a certain meaning and the courts will be able to decide by seeing the readily available law instead of going through the back breaking bundles of old common law principles. The dissertation will also focus the present situation of such an outcome and how the companies are functioning. The question of whether the courts are happily adopting the new law or not. Last but not the least the dissertation will also consider that are there any negative possibilities of such a change? In times of economic growth has the new Companies Act 2006 been strong enough to bring corporate opportunities or has it been very rigid and tough for the directors? While researching I have gone through many books, articles, journals and law reports. These sources have helped me to build up my dissertation and the ideas and principles of many authors will be discussed in my chapters.
1.2 Codification of Directors’ General Duties
Before Companies Act 2006 the duties of directors of a company were mostly governed by the equitable principles of fiduciary duty and the common law of negligence. One of the most important changes made by Companies Act 2006 is to codify, in sections 170 to 181, the equitable principles of fiduciary duty and the common law of negligence as they apply to directors. Sections 171 to 177 are based on certain common law rules and equitable principles as they apply in relation to directors and have effect in place
