Critical Analysis of Directors' Duties and Abuse of Power

This essay critically evaluates the adequacy of directors' duties under UK company law, as outlined in the Companies Act 2006, in preventing the abuse of power and privileges. The essay begins by establishing the importance of directors in managing a company's affairs, referencing foundational legal principles such as separate legal personality. It then defines directors' duties, differentiating between statutory and common law obligations, and examines specific duties including adherence to the company's constitution, promotion of company success, independent judgment, reasonable care, skill, and diligence, avoidance of conflicts of interest, and prohibitions on accepting benefits from third parties. The analysis incorporates relevant case law to illustrate how courts have interpreted and applied these duties. The essay proceeds to assess the effectiveness of these duties in preventing abuse, highlighting inconsistencies and ambiguities that arise from the reliance on both statute and older common-law precedents. Two contrasting cases are examined to demonstrate potential incoherencies in the law, particularly concerning the determination of de facto directors and their equitable fiduciary duties. The essay concludes that the law alone may be insufficient to fully prevent breaches of duty, and suggests that principles of corporate governance, developed after the law, are useful to incorporate when examining whether directors have caused breach.