Whether Jeremy and Jack Have Any Liability Towards the Company or Not

Running head: COMPANY LAW 1
Company Law 1
Name of the Student
Name of the University
Authors Note

COMPANY LAW 11
IRAC- I
Issue
In this paper, the issue to be discussed is whether Jeremy and Jack have any liability
towards the company or not.
Rule
Historically, directors have been subject to English Company law obligations.
Nevertheless, the vast majority of the roles of directors had not been laid down in legislation.
However, presently the duties had developed through case law. Those functions included:
 The obligation to act in good faith in the benefits of the business;
 The obligation to show competence and care;
 The obligation to dodge contradictory interests and duties; and
 The obligation not to make a hidden profit.
In case of the UK companies, the directors are appointed in the board of the company by the
central authority1. Directors usually have many duties to perform. Presently, seven basic duties of
the directors are classified under the Companies Act, 2006 of the UK. Sections 171 to 177 of this
Act deals with the duties of directors, which replicate the Common law and equitable values. The
duties of the directors include:
 Duty to act within authorities;
 Duty to endorse the achievement of the company;
 Duty to implement free judgment;
1 Guest, Paul M. "The determinants of board size and composition: Evidence from the UK." (2008) Journal of
Corporate Finance 14.1: 51-72.

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 Duty to implement rational care, ability and persistence;
 Duty to avoid disputes of interest;
 Duty to reject assistances from the third parties; and
 Duty to proclaim interest in future dealings or agreements.
The above-mentioned duties may not be restricted or ignored, but companies may purchase
insurance to cover the costs of directors in case of violation of their duties2. The remedies for the
violation of duties is not codified in the Companies Act, 2006. Therefore, it follows the
provisions of common law and equity and include damages for losses, injunction or specific
performance3.
Section 172 of this Act deals with the overriding duties of the directors which states that a
director will act in the way he/she sees fit to maximize the success of the company for the good
of its associates completely. In Regentcrest plc (in liq.) vs. Cohen [2001] BCC 494 at [124] case
the court held that the mind of the director played an important role concerning with the
overriding duties.
Section 174 of this Act deals with the duty of skill and care. According to this section, the
obligation of skill and care puts current carelessness legislation on a substantive basis and
ensures that a director must behave with the care, expertise and caution that a fairly
conscientious individual should possess with both, (i) a director’s general awareness, expertise
and understanding to be required and (ii) the director’s own general awareness, expertise and
experience. It can also be said that, all directors must possess the ‘rational director’ standard and
must be assumed to have a director’s awareness, abilities and experience in that role to be
2 O’Sullivan, Noel. "The demand for directors’ and officers’ insurance by large UK companies." (2002) European
Management Journal 20.5: 574-583.
3 ANDREW. KEAY, L. L. B. DIRECTORS'DUTIES. (JORDAN Publishing Limited, 2016).

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anticipated. Therefore, a director with added or more advanced expertise (for instance
accountancy qualifications) will be kept with that experience to the level of a rational and fair
director. In the case of Re City Equitable Fire Insurance Co. [1925] Ch 407 the court stated that
even if the some of the directors have infringed their obligation of care, because an exclusion
clause was available for neglect, they were not obligated to compensate. Not only has that, even
in case of absence of an exclusion clause, a director needs not to compensate if he himself acted
honestly.
Section 177 and 182 deals with the duties to proclaim interest in future dealings or
agreements. Directors must report to the board of their company regarding the ‘nature and
extent’ of any interest that they may have in any transaction or agreement in which the company
is or may be a party to. In case of any of the sections a director can made a declaration either at a
meeting of the board of the directors or by a written or a general notice. If it becomes improper
or incomplete, a director must correct that statement4.
Analysis
In this given scenario, it has been observed that Land ComPlc is a property company the
objective of which is purchasing land, construct private apartments and buildings and selling
those real estates to the people at large directly.
It includes six directors among which three directors hold the position of executive
directors. A solicitor, namely, Jack and capacity surveyor, namely Jeremy took the responsibility
of surveying and registering a piece of land purchased by the company worth 500,000 Euro.
After visual inspection it has appeared to the surveyor that the highway could be accessed by the
fourth side but after inspecting the title deeds it has been observed a two-meter strip of land
4 Esser, Irene-marie, and Johan Coetzee. "Codification of directors' duties." (2004) Juta's Bus. L. 12: 26.