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Chapter 9

Duties

3.1 General duties

Prior to the Companies Act 2006, common law rules and ‘equitable principles’ made
up the law on directors’ duties. These have now been replaced by the specific
statutory duties provided in the Companies Act 2006.

It should be noted that there are specific legal duties given in the legislation to
directors such as the duty to prepare a directors report, and as such these may be
referred to as the general duties of the directors.

s.171 To act  A director must act in accordance with the company’s
within powers constitution and only use his powers for the purpose which
they were given.

 If this rule is not adhered to the transaction will be void,
unless it is approved by shareholders in a general meeting.

s.172 To  A director must act in good faith, in a way which promotes the
promote the success of the company and for the benefit of the members
success of the as a whole.
company
 The Act requires directors to have regard to:

(a) the likely consequences of any decision in the long term

(b) the interests of the company’s employees

(c) the need to foster the company’s business relationships
with suppliers, customers and others

(d) the impact of the company’s operations on the
community and the environment

(e) the desirability of the company maintaining a reputation
for high standards of business conduct; and

(f) The need to act fairly as between members of the
company.

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