Directors cannot use their position to confer upon themselves additional powers which should be properly executed by the Board. This position was reinforced in a recent case, which Abigail Owen, Corporate Partner at Rawlison Butler LLP reflects on below.
The High Court has recently ruled on a case concerning the extent of a directors' authority to exercise the powers of the company. The managing director of the board (who was also a minority shareholder), acting alone, took a decision to suspend the chairman of the company following unproved allegations of misconduct by the chairman. A declaration was sought that the managing director had no authority to make such a decision and it was, therefore, invalid.
The High Court found that the managing director had acted unlawfully. There were no express provisions in the company’s articles of association which delegated any of the powers of the Board to the managing director, nor was there any implied delegated authority to suspend the chairman - it was intended to be a decision of the Board. Furthermore, the decision was not a commercial decision nor one which arose in the day-to-day running of the company's business; the decision should have been made by the Board and was, therefore, found by the High Court to be invalid.
If you would like further information on directors’ authority and their powers, or any other issue, pleae contact Abigail Owen by emailing Abigail or by calling her on 08450 990045, or speak to your usual contact in the Corporate Team.
This document is provided for information purposes only and does not constitute legal advice. Professional legal advice should be obtained before taking or refraining from taking any action as a result of the contents of this document.
