Can directors mitigate the increased risk of claims under CA 2006? asks Patrick Beale
On 1 October 2007, the provisions of the Companies Act 2006 (CA 2006) governing directors’ duties and the rights of shareholders to bring claims against directors in the name of the company (so-called derivative claims) will come into force. Concern has been expressed that the changes will expose directors to increased litigation.
The effect of the directors’ duties under CA 2006 (see box on p 1034) is cumulative so that where more than one duty applies, a director must comply with each applicable duty. So, for example, the duty to promote the success of the company will not excuse a director from a breach of the duty to act within his powers, even if he considers that it would most likely promote the success of the company.
The most significant change is the duty to promote the success of the company for the benefit of members as a whole. The meaning of this phrase is not devoid of uncertainty. “Success” in this context will usually mean “long-term increase in value”. In
