Business Law: Directors' Duties and Limited Liability

Running Head: BUSINESS LAW
Business Law
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Author Note

1BUSINESS LAW
Table of Contents
Answer 1..........................................................................................................................................2
Issue.............................................................................................................................................2
Rule..............................................................................................................................................2
Application..................................................................................................................................5
Conclusions..................................................................................................................................8
Answer 2..........................................................................................................................................8
Answer 3........................................................................................................................................10
References......................................................................................................................................12

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Answer 1
Issue
The issue which has been identified in the given situation is that whether any of the
directors’ duties which have been provided through the provisions of The Companies Act 2006
been violated by Jatinder, Sukhninder and Lucy or not being the directors of the company in
context.
Rule
The Companies Act incorporates the common law provisions of directors’ duties into its
statutory provisions. The legislation sets out specific duties which any director of a company in
UK has to follow while discharging their duties for the organization that they have the
responsibility to manage (Hannigan 2015)1.
Until the legislation had been incorporated the duties of directors in UK were subjected to
three broad categories which are as follows.
 The fiduciary duty
 The statutory duty
 The duty of care and skill
However after the enactment of the legislation the duties of directors have been
categorized as general duties under Section 170-177 of the Act.
1 Hannigan, B., 2015. Company law. Oxford University Press, USA.

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The duties according to their Sections which are relevant in relation to the issue are as
follows:
 Section 171- Thu duty of operating within powers provided to the
directors
 Section 172- the duty of promoting companies’ success
 Section 173- The duties as per which independent judgment needs to be
applied by the directors
 Section 174- the duty of working with reasonable skill care and diligence
 Section 175- the duty of giving priority to company interest over person
and avoiding conflicts between the two interests
 Section 177- duty of declaring interest which they may have in relation to
a transaction
Section 170 of the CA clarifies the scope of directors’ duties in under the legislation and
states the Sections of the general duties. It further declares that the general duties have been
derived from rules of common law and equity.
The initial duty as provided under Section 171 of the CA is the duty of acting in proper
purpose of the company. They must follow the constitution of the company and exercise their
powers towards a proper purpose. There are several circumstances in which the provisions of
this Section may be violated by the directors. For instance in the case of Criterion Properties plc
v Stratford UK Properties LLC [2004] UKHL 282 the directors had been found to have violated
2 Criterion Properties plc v Stratford UK Properties LLC [2004] UKHL 28