Legal Aspects of a Business

Legal Aspects
of a Business

Table of Contents
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
By referring to relevant legislation and case law, critically discuss the following duty of a
director of a company: Duty to act within powers (section 171 Companies Act 2006)........1
CONCLUSION................................................................................................................................3
REFERENCES................................................................................................................................4

INTRODUCTION
The legal aspects of business can be comprehensibly said to be the legislation as well as
laws that are applicable to an organisation functioning within the economy. In relation to such
legal aspects, it has been determined that these define the manner in which an organisation has to
carry out its day to day activities (Clarke and Henderson, 2016). In an instance whereby the
entity is found to be breaching any of the laws or legislation, then it becomes tough for them to
ensure their long term sustainability. The below mentioned report will focus upon Section 171 of
Companies Act 2006 that is associated with “Duty to act within power”.
MAIN BODY
By referring to relevant legislation and case law, critically discuss the following duty of a
director of a company: Duty to act within powers (section 171 Companies Act 2006)
In the present context, it is important for each and every entity operating its functions to
abide by several laws as well as legislation that comprehensibly apply to them. In case an entity
fails to comply with any of the laws, then it faces difficulty in achieving its goal and objectives
in the pre defined time frame. In order to ensure compliance with all the guidelines of statute, an
entity tends to appoint a director who possesses wide knowledge of diverse sectors (McCracken
and et. al., 2018). They are empowered with some power and duties. These are discussed in a
detailed manner within Sec. 171 of The Companies Act 2006.
Section 171 of the act stipulates that any of company’s directors do not possess the authority to
undertake decisions for which they are not authorised. In an instance whereby the director is of
the view that taking any such decision would be beneficial, then they need to comprehend that
this can lead to legal action being taken against them inclusive of cancellation of their
directorship. As per Section 171, every director possesses two diverse set of duties whereby their
first duty is concerned with performing all the tasks as per AOA of the company while their
other duty is about executing any only those tasks for which their appointment has been done
(Directors Duty, 2020).
There are a number of reasons behind describing the duties of a director in a detailed
manner within The Companies Act 2006. Directors are regarded to the key persons within an
organisation who can take any decision which can affect the process of accomplishment of the
corporate goal. Whereby their duties as well as powers are limited, it implies lower probability of
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