Legal Aspects of Business

Legal Aspects of Business

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
Duty to act within powers...........................................................................................................1
Duty to promote success of the company...................................................................................1
Duty to exercise independent judgment......................................................................................2
Duty to exercise reasonable care, skill and diligence.................................................................2
Duty to avoid conflicts of interest...............................................................................................2
Ratification at the time of a breach.............................................................................................3
CONCLUSION................................................................................................................................3
REFERENCES................................................................................................................................4

INTRODUCTION
This study will effectively focus on critically evaluating the case law associated with the duty of
a director of the company. Furthermore, this study will evaluate the duties which helps in
significantly promoting the success of the organization. The relevant case law which is
associated with the study is Percival v wright (1902).
MAIN BODY
The directors of the company in turn are highly expected to effectively act within the good faith.
The directors are considered to be as the agent of the organization rather than the trustees of the
property. They have a high degree of fiduciary relationship with the company (Mire, 2016). The
directors must act collectively. The director must always work in the best interest of the
company. This is useful in ensuring that, the director of the company in turn works in the best
interest of the company.
Duty to act within powers
Under section 171, the director of the organization must effectively act in accordance to the
constitution of the company. The director of the company must effectively comply with the
constitution of the company. In case the director of the company has been given certain power
under the organization’s rule then the individual must only use those power for the key purpose.
The Percival v wright (1902) is the significant case law within UK which is mainly concerned
with the duties of the directors. As per this case law, the directors of the company are not
considered to be as trustee of the organization. The directors of the company has the right to
purchase their own shares without disclosing any sort of pending negotiation at the time of sale
of the undertaking of the company.
Duty to promote success of the company
The Companies act 2006, section 172 tends to state that, the director of the company must
significantly act within the good faith of the company. It is useful in benefitting the members and
shareholders of the company (Mallin, Melis and Gaia, 2015). This duty is significant for
benefitting the shareholders and members of the organization as a whole. The duty to effectively
promote success associated with the company. They focus on working in the interest of the
creditors. They have the key desirability to effectively maintain reputation for carrying out the
business conduct in an ethical and reliable manner. The director must always act fairly between
the company and members which is useful in promoting success to the organization. The director
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