business law

Topics: Fiduciary, Board of directors, Corporate opportunity Pages: 7 (2678 words) Published: January 9, 2014
Director’s duties simply mean that directors shall act in accordance with honesty, diligence, and prudence. Besides that, director’s duties also include avoidance of conflict of interest. Thus, directors should state their intention in any of the transaction in which the company is involved besides following the instructions of the board of directors. Directors should also exercise caution and competence in all circumstances as a sensible person would react under the situation. Directors also should not make use of the information attained as a board of the directors. Fairness is also an important duty of directors whereby directors should deal with their fellow board of directors and shareholders without any favouritism. Directors should not get engaged in any of the conduct that may bring in disrespect to the company and also to the other directors is also one of the prominent duties of directors. Moreover, directors should also be independent and must not compromise on the rights to provide independent judgement. However, at the same time directors must restrict their independence in a good faith to make decision that would benefit the company. Corporate opportunity factually explains that any business opportunity that could advantage a business (Law Cornell, 2010). Thus, corporate opportunity doctrine leads the legal duty of directors, officers and leading shareholders in a company, in the responsibility of loyalty, not to take any opportunity for their oneself deprived of first revealing the chance to the board of directors of the company also providing the board the opportunity to decline the opportunity on behalf of the corporation. Therefore, if this process is interrupted, and a corporate fiduciary proceeds the corporate opportunity anyhow, then the fiduciary has been disrupted its duty of loyalty, and the company will be entitled to a constructive faith of all profits attained from the unlawful transaction. Hence, according to director’s duty and corporate opportunity doctrine, directors could not take any corporate opportunity for his own benefits.

The breach of fiduciary duty by directors could be well explained by the Section 175 under Companies Act 2006. This section states the duty to avoid conflicts of interests by the directors. Therefore, through this section it explains the issues why directors could not take in corporate opportunity for their own benefit which makes it a breach on their fiduciary duties. (Alistaire, 2012) Therefore, Section 175(1) CA 2006 relates that a director should escape in where he consumes or may require a direct or indirect interest that conflict or may conflict with the interest of the company. (Alistaire, 2012)Thus, this act directly means that in any circumstances that a director faces, directors must avoid the conflict of interest. Thus, this section is a through transposition of the common equitable principle to escape conflict of attention where directors are accountable for every return gained individually in situation that may conflict with their responsibilities allocated towards the corporation. The case Keech v Sanford could be used to explain the principle of director’s fiduciary duty to avoid conflict of interest. The facts of this case states that, under the will of the departed lessee of some property, the leasehold interest was given to the trustee to stand for the benefit of a child. However, when the lease came for renewal the lessor declined to grant a new lease to the child due his incapacity and the trustee obtained the renewal of the lease to himself. Thus, the held of the case by Lord King LC ordered the trustee to give the new lease to the child. Consequently, this case shows that directors should not deprive secret profits for their own interest and must be responsible for any profits made by the reason and only by the reason of their position as the company’s directors. Regal (Hastings) Ltd v Gulliver [1942] 1 All ER 378 is also a landmark...
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