Duty of a director of a company

Duty of a director of a
company

Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY..................................................................................................................................3
Section 171 Duty to act within powers........................................................................................3
Duty to act for proper purposes...................................................................................................3
Consequences of Breach..............................................................................................................4
CONCLUSION................................................................................................................................5
REFERENCES................................................................................................................................6

INTRODUCTION
This report gives a brief description about the duties and responsibilities of directors in the
company which are specifically under the guidelines and constitution of Section 171 Companies
act 2006. This report also mentions the consequences of breaching of contract and the changes
that are needed to be made in order to avoid these type of circumstances.
MAIN BODY
The Companies Act 2006 sets the duties of the directors of the company according to a
statutory code. This act was introduced in order to promote the company’s success. There are
some duties which on the guild of directors which are set by the law. Before the Companies Act
2006 came into action it was set on the general equitable guidelines and principles permissible
by the law. The act clearly defines the duties and describes the way a director must behave in the
company. If there is any breach of duty then the director must be held responsible for the failure
of it (Taylor and Kong, 2019).
Section 171 Duty to act within powers
Director of the company must work and take decisions according to the constitution of
the company as per the guidelines set in section 257 which is also the articles for the company
and can be worked as agreements and resolutions. With the help of guidelines defined in the
section the company may proceed ahead than the duties which are statutory. This will increase
the chances and add more requirements on the directors. For example- director of XYZ company
is entitled to pay £ 11,000 for stock but on the other hand the guidelines set by the company
states that he can allow a transfer of not more than £ 10,000. In case he decides to go against it
then it is clearly breaking of Section 171. There are some situations where the situation is more
complex. For instance if a director of the company issue more shares to take control of decisions
and work the company according to him then it is a breach of a contract. A director is allowed to
issue shares to himself but not to an extent where it is for the motive to control the decisions of
the company (Langford, 2019).
Duty to act for proper purposes-