Director's Duty to Promote the Success of the Company

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TABLE OF CONTENTS

INTRODUCTION1

Background of the Study1

Aims and Objectives2

Structure of the Thesis3

Chapter I: Introduction3

Chapter II: Literature Review3

Chapter III: Methodology3

Chapter IV: Analysis and Discussion4

Chapter V: Conclusion4

LITERATURE REVIEW6

The Genesis of the Companies Act6

The role of directors in a company7

The emergence of the duty8

The Duty to Promote the Success of the Company8

METHODOLOGY11

Research Design11

Ethical Concerns11

BIBLIOGRAPHY12

INTRODUCTION

The purpose of this chapter is to provide the reader a brief overview about the research topic and provides the main purpose and aim behind this research study. It comprises of the background of the problem, which provides a brief overview of the topic of the research and the problem.

Background of the Study

The new Companies Act preserves the integrity of the whole range of varieties of companies that can be created in the UK. First of all, companies are divided into a limited liability company and a company with unlimited liability (participants). Responsibility of the participants may be limited or shares or a guarantee of the participants (Article 3) (hereinafter unmarked links - to the Act). Further, the company can be either private or public. The fact that the company is public is reflected in its registration certificate (Certificate of Incorporation). For a private company the minimum capital is not set, and for the public of 50 thousand pounds. Private limited companies can be identified by words “limited” or the abbreviation “ltd”. At the end of their name, and public limited companies - in the words “pubic limited company” or the abbreviation “plc”. For companies registered in Wales, the Welsh equivalents are permitted.

In the UK, it is also possible the creation of various partnerships (general partnership, limited partnership, limited liability partnership), but they are not governed by the Companies Act.

While the Companies Act describes the general duties of directors in sections 171 to 177, section 170 (1) stipulates that these duties "are owed by a director of a company to the company". Although this is reminiscent of the Canadian duty of loyalty under section 122(1) ( a) of the CBCA,92 section 172 of the Companies Act goes further in specifying instructions which guide directors under the heading "Duty to promote the success of the company".

This section was included as a response to the prevalent perception among directors that they had to give priority to the immediate returns of shareholders regardless of the impact on longer term value". According to Saleem Sheikh, "the duty to promote the success of the company codifies the current law fiduciary duty imposed on a director, and enshrines in statute what is commonly referred to as the principle of 'enlightened shareholder value”. On its face, the section embraces the shareholder primacy model while tempering it with a requirement to "have regard" to other stakeholders.

For UK directors' duties, the value of undertaking an examination into the UK legislation lies in the fact that UK jurists have delved into the theoretical underpinnings of both the shareholder primacy model and stakeholder approaches with a view to drafting a coherent set ...