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stipulates directors “may consider the interest” of other stakeholders. 81 It is left to the
court then to develop the standard and determine the parameter of the director‟s
discretion. 82 Only Connecticut enacts a mandatory provision that requires directors to
consider the interest of other constituencies while the majority adopt the permissive
approach which authorizes but does not require directors to have regard to interests
other than shareholders. 83
In this aspect, the UK has moved towards the same direction as the USA by passing
the provision in section 172 of the Companies Act 2006 while New Zealand,
Australia and Malaysia are still relying on the courts to provide for interests of other
constituencies. 84 However, the provision does not make any changes to the corporate
law because the core duty remains to the company. Other constituencies, like
creditors for example, are protected only in the event the company is insolvent in
both common law and as discussed above and statutes on areas relating to liquidation
and insolvent trading.
5.2.3.2 Statutory Duty of Directors in Relation to Groups of
Companies
The principle of separate legal personality enunciated in Salomon‟s case is seen
today as not reflecting the commercial entity of the companies. When the case was
decided in 1897, the economic circumstances were different, the principle of laissez
faire ruled supreme and the fostering of business enterprises demanded that the
81 Ibid.
82 Ibid.
83 James Hanks Jr. “Playing with Fire: Non Shareholder Constituency Statutes in the 1990s” [1991]
Stetson LR 96 at 103-105.
84 See chapter 6 for further discussions.
89