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the Committee foresaw difficulty due to lack of remedy in the event directors abused
their powers. 90
It also rejected a proposal to alter board composition to represent wider interest, as in
Germany, because it would involve radical changes to British company law structure
and would not gain wide support. 91 In the end, the Committee recommended, and the
legislature adopted, a duty to promote the success of the company which enshrined
the principle of enlightened shareholders value. The duty requires the director to
consider in good faith the way which will promote the success of the company and in
doing so to have regard to the factors listed in the section. 92 The factors listed in the
Act are not exhaustive and represent the wider expectation of business behaviour and
the expectation that business decisions should be exercised by the directors subject to
good faith. The director has to exercise his duty of care skill and diligence 93 when
considering factors listed in section 172(1).
The legislature accepted the recommendation by the Committee that there should be
statutory statements regarding the director‟s general duties. Consequently, the
Companies Act 2006 sees the codification of the common law duties and equitable
principles into the Act. The statute also provides for remedies if the director breaches
his or her duty in section 178. In addition to the codification of the director‟s duties,
the Committee suggested reforms of the law to reflect the changes in the economy
which includes globalization, the European influences on the British company law,
the advance in the information technology as well as the changes in the pattern of
ownership and the pattern of productive activity. 94
90 Ibid.
91 Ibid, at [5.1.32].
92 Companies Act 2006 Explanatory notes at [325].
at 6 June 2010.
93 This principle is codified in section 174 of the UK Companies Act 2006.
94 The Steering Group above n55 at Ch 2.
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