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Directors

Powers

The division of power within a company

The legal theory is that all decisions about the running of the company’s
business should be taken by the members in general meeting.
However, the members usually delegate the power to manage the
business to the directors and they exercise all the powers of the
company on a day-to-day basis.

Directors are required to exercise their powers in accordance with the
company’s constitution.

Note that the power to manage the business of the company is given to
the board as a whole, not to the individual directors. Where a
company’s articles delegate the management of the company’s
business to the board, the members have no right to interfere in
decisions made by the board. Directors are not agents of the members
and are not subject to their instruction as to how to act.

Restrictions on the directors’ powers

Although the directors are given the power to run the company once they are
appointed by the members there are some restrictions put on this power.

General statutory restriction

The Companies Act 2006 states that directors must only use their powers ‘for the
purpose for which they are conferred’. A director using their powers for any other
reason would be held to be in breach of their duties.

Specific statutory restrictions

When running the company the Companies Act states that there are certain
decisions for which the directors must gain shareholder approval by way of an
ordinary or special resolution, for example alteration of the articles and reduction of
share capital (seen in the previous chapter).

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