A timely reminder to directors of companies, regardless of their size, that they are all bound by directors’ duties - Abigail Owen, Corporate Partner at Rawlison Butler LLP considers a recent case on this topic.
The Court of Appeal ruled on a case concerning a director who had accepted a free, undisclosed and unapproved loan of equipment from a customer of the company. The Companies Act 2006 imposed on directors many duties which had not previously been contained within legislation and which replaced ‘common law’ principles previously in place. In this case, the director arranged with one of the company’s clients for him to be provided with a second hand excavator and dumper for the renovation of a house which belonged to him and his wife. The director had not offered the loan of equipment to the company, nor had the loan been authorised by the company.
The Court of Appeal held that the director had breached his duties as a director of the company. The director’s duty of no conflict with his company extended to preventing the director from depriving the company of the opportunity to consider whether or not it objected to the diversion of an opportunity offered by one of its customers to a director personally.
This case does not provide any new law. However, it serves as a reminder to directors of companies, regardless of their size, that they are all bound by directors’ duties. The most important thing for any director to remember is that he is under a duty to act in good faith and in the best interests of the company and in doing so must take into account the facts set out in the Companies Act 2006, as well as the other obligations which must be observed by a director.
If you would like more information on directors’ duties or any other issues, please 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.
