Parker Hood

Directors' Duties Under the Companies Act 2006: Clarity or Confusion?

The Companies Act 2006 (CA 2006) codified the duties of directors. One of the main aims of this codification process was to increase the laws accessibility, coherence and comprehensibility to company directors, particularly directors of small and medium-sized enterprises. This article seeks to examine the nature of certain code provisions, and looks at how well the code achieves its objectives. The article focuses on four areas. First, the structure of the code is looked at, then the role of the old law is examined. This second area involves looking at section 178 of the CA 2006 on remedies, which applies the general law of remedies, and comparing it with section 195, which provides similar statutory remedies where the prohibition on “substantial property transactions” has been breached. Thirdly, the ambit of the general codified duties is considered, which entails looking at section 170 of the CA 2006, which reasserts the rule that a director owes duties to the company she or he directs, and considers how section 170 interacts with section 172; consideration is also given to the requirement, in section 172(3), regarding the “interests of creditors”. Finally, the conflicts provisions (sections 175 and 177) are considered, as is section 176 of the CA 2006, concerning benefits received from third parties.