This chapter studies the codification of the director’s duties, how breach of duty can be avoided, and the duties in ss 171–74 of the Companies Act 2006 (CA 2006). Sections 171–74 of the CA 2006 provide that a director is under a duty to act in accordance with the company’s constitution; a duty to act in a way that would promote the success of the company; a duty to exercise independent judgement; and a duty to exercise reasonable skill, care, and diligence. Ultimately, the standard expected under s 174 is that of a reasonably diligent person with the general knowledge, skill, and experience that the director has. Meanwhile, a breach of duty may be avoided if the breach is approved or authorized, ratified under s 239, or if the court relieves the director of liability under s 1157.
Chapter
10. Directors’ duties I: duties of performance
Chapter
11. Duty of care, skill, and independent judgment
In addition to their fiduciary obligations, directors are subject to duties of care, skill, and diligence. This chapter discusses the statutory standard of care, skill, and diligence which is an objective standard as set out in CA 2006, s 174. The section does not indicate the content of the duty, however, which is a matter for the case law. The issues of concern revolve around the extent to which directors need to be informed to carry out their duties and the extent to which they can delegate to others and then rely on that delegate. There is also a related duty in s 173 to exercise independent judgement rather than blindly follow the instructions of others, which is also discussed in the chapter.
