Director's Duty: Enhancing Shareholder's Value Under Companies Act 2006 - Essay Sample

Introduction

Under Section 172, a director must act in good faith on behave of the company. This position has in the Companies Act of 2006 with new requirements. The new requirements state that the director has the responsibility of pushing forward the enlightened shareholders' value. Primarily, the enactment of section 172 of the Company Law in 2006, the director is required to look beyond profit and, at the same time, consider other factors and third-party individuals or stakeholders who can be affected by their decision. Therefore, the director has a responsibility to both the shareholders and stakeholders when making decisions to ensure that their interests are considered.

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Since the Act came into existence, it has had limited practical impact because of tow main reasons. Firstly, the Act was mainly established on principle law that the court would judge whether a director has acted in the organization's interest subjectively instead of objectively. This mainly meant that the director could be safe from any complaint of a breach from the shareholders or stakeholders provided that the director had performed in good faith. Secondly, the section requires that the directors, when making their decision, they should have the interest of third-party stakeholders. Importantly, this did not give rise to any remedy from which the stakeholders could directly enforce.

Taking into consideration the case of Antuzis v DJ Houghton Catching Service Ltd, the position might change. In this case, the shareholders' value was mainly used to give the staff members a straight remedy against the director of the company's employer. Primarily, in Antuzis, the workers had worked for the firm in horrendous conditions, and they were subjected to abuse t their employment rights, which translated to modern-day slavery. When the issue was discovered, the company, directors, decided to enter into liquidation, but the employees decided to bring up a claim against the directors. The claim stated that the directors should be held personally liable for the breach of employment contracts with its staff members.

For the claim to sail through, the court has to find a way around the rule in the case of Said v Butt which mainly stated that a director acting in good faith with the scope of the faith authority in his or her disposal is not personally liable for inducing a company to breach of contract. The judge was able to find a way around the ruling through its implementation of section 172. The case has had a significant decision in that it has a different view contrary to previous common law position in it comes to the issue of a director failing to take into account the interest of a company.

Primarily, the court may decide to argue against what was objectively in the interest of the company as faith cannot be used as a pre-requisite for relief. If such position is held, it would be an expansion of the director's potential liability and interference of management decisions made in good faith. Moreover, it remains to be seen if the court would interfere with directors conduct in less repugnant cases than in Antuzis.

Therefore, directors have the responsibility of ensuring that they use their influence and powers given to them to ensure that the shareholder value and interest come first. At the same time, they should take into account the interest of third-party individuals to ensure that their decision does not affect them any way that can be deemed as a breach of contract. The duties of a director include but not limited to the following under section 172 of the Company Act of 2006.

• Act with his or her powers.
• Promote the success of the organization for the benefits of its shareholders.
• Exercise independent judgment.
• Avoid conflict of interest.
• Exercise reasonable skill, care, and diligence.
• Not accept benefits from third parties.
• Declare interest in existing or proposed transactions or arrangements.

The breach of the above duties can result in various consequences to the director. The consequences can be removal from office, restoration of the organization property, setting aside transactions, criminal fines, compensation or damages for financial losses incurred, and interim injection. When there is a breach of duty by the director, it is the company that will take action. Moreover, one or more shareholders can make a claim against the directors if they believe the directors' action has resulted in personal financial loss or damage.

Question 3: Corporate Criminal Liability in Relation to Manslaughter

The United Kingdom criminal law had for a long period recognized that organizations can be criminally liable for strict liability for offences such as breach of trade transitions. However, the organizations criminal liability is mainly determined through the identification principle. The principle argues that an organization can only be liable to the omissions of individuals of criminal acts if they can mainly be identified as the company’s directing mins and will. This mainly include officers and directors who perform management functions. Moreover, this explains why it has been difficulty to prosecute large organizations for the decision that require mens rea, mainly if the organizations operated through opaque decision-making structures.

The offence of corporate manslaughter is created under section1 which states that any organization to which the section applies is guilty of an affects if its activities causes a person’s death and results in breach of relevant duty care owed to the deceased by the firm. Consequently, an that organization is guilty of corporate manslaughter is liable to conviction on indictment to a fine. In such a case the following should and must be proved.

• Defendant is a qualifying organization.
• The organization owed a duty of care to the deceased.
• The gross breach contributed or caused death.
• The management was considerable element in the breach.