Chapter 7 Directors' Duties - alastairhudson.com

statutory code considers each statutory principle in turn, and then, because those statutory
principles are explicitly predicated on the old case law, that discussion considers the case law
applicable to each statutory principle. The third section of the chapter considers other aspects
of fiduciary law which are significant in the liabilities of directors beyond the statutory code. 3
The fourth section of the chapter considers other aspects of the law relating to directors. 4 The
fifth section of this chapter considers the disqualification of directors from their office. 5 The
sixth section of this chapter considers the non-legal requirements of corporate governance
regulation which have been introduced in recent years in an effort to impose practical
controls on the behaviour and remuneration of directors particularly in large public
companies.
The legal nature of directorship
What is a director?
The nature of directorship is central to company law. Directors are fiduciaries, as considered
below, but they may also have other capacities: not least their personal capacities. For
example, in a private company the directors are usually substantial shareholders as well as
being the company‟s managers. Therefore, there is a possibility for conflicts between such a
person‟s fiduciary and personal capacities. In a public company, the directors normally have
few shares as a proportion of the total shareholding in the company, and so their fees and
other emoluments, rather than their dividends from their shareholding, are their main source
of profit from the company. Consequently, in the context of public companies, the
management and the ownership of the company are more likely to be separated.
Importantly, there are also different types of directors. In practice, companies will have
different grades of director. There will usually be full-time, executive directors, and parttime,
non-executive directors. In large public companies, good corporate practice generally
requires that executive directors may not control all aspects of management (as considered
below), especially decisions relating to their own salaries. Consequently, non-executive
directors (generally drawn from backgrounds which give them useful perspectives on the
company‟s business) are used to decide issues which directors ought not to decide alone, and
are used to advise the executive directors on the most appropriate way for the company to act
in a number of circumstances. The more complex the company or group of companies, the
more likely it is that different directors will have very different responsibilities within the
organisation: whether managing a particular trading unit, or supervising the organisation‟s
financial affairs, or personnel, or whatever. Consequently, there can be differences in the
levels of power, influence and remuneration of directors. A number of different types of
people may be treated as being a director, as considered next.
3 At p.
4 At p.
5 At p.
2