MODULE TITLE: COMPARATIVE CORPORATE GOVERNANCE
ESSAY TITLE: ‘There are no qualifications for being a company director. Even directors of listed companies do not have to take any examinations. In principle, anyone can become a director. One might therefore think that the duties of an office so unexacting in its qualifications would be simple and easy to ascertain. In fact, this is far from the case. In fact, the duties of directors can be discovered only by examining at least three different sources which lie like strata one above the other. The bedrock is the duties which directors owe at common law, or more precisely in equity, simply because they are managing other people’s property. Over that layer has been imposed a number of specific statutory duties intended to reinforce the duties at common law. And over that layer has been imposed still further duties under various self-regulatory codes, which are also intended to reinforce the common law duties in areas not thought suitable for legislation’.
Discuss the above statement in light of the position of company directors in the UK and Australia. WORD COUNT: 5357 (Excluding Bibliography), 5948 (Including Bibliography) Introduction
A company being a legal entity can only act through natural persons to run its affairs. Director is the person on whose behalf the company operates. They are professionals, hired by the company and are not the employee of the company. The title ‘director’ implies a position that is highly eminent and prestigious. “It is not the name but by functions but by duties where one is described as director. It is only when a person is duly, appointed by the company to contract in the company's name and, on its behalf that one functions as a Director. Further the company’s article may designate its Directors as governors, the board of management, but under the law they are simple Directors.”1 A director is responsible for managing the business and affairs of the company and also along with company secretaries that the company complies with the companies’ act 1985. In the book of law, there is no criterion as to skills or qualification of persons for being a director of the company neither in the UK nor in Australia. Even directors of listed companies do not have to take any examinations. In principle, anyone can become a director. One might therefore think that the duties of an office so unexacting in its qualifications would be simple and easy to ascertain. Having said that, no matter how prominent and unexacting the title director may sound, the law does not treat the position as just another step up the management ladder.2 Indeed, the duties of directors can be discovered only by examining following sources. Part I discusses Strata one above the other, to whom are directors’ duties owed? Part II is Equitable Fiduciary duties. Part III explains Common law duties. Part IV discusses statutory duties and its codification. Part V discusses breach of Duties and exceptions to it. Part VI discusses the above duties in light of the position of Director in UK and Australia. And Part VII is conclusion.
I. Strata one above the other and to whom are directors’ duties owed? There has been much debate as to whether all officers are equal or whether there are some distinctions based upon the precise position held, such as chief executive or chair of the board. The general consensus is that all officers are equal in their duties but the level of skill and care expected may change depending upon the position held. There are various types of company officers, including the chairperson, managing director, Chief financial officer and non-executive directors. In a particular case the officers (such as the chair of the board) may have certain powers and responsibilities, such as participating on special committees (for example the audit committee). The possession of particular powers and responsibilities will be taken into account when determining whether the...
Bibliography: 2. Noakes D,‘Dogs on the Wharves: Corporate groups and the waterfront dispute’ (1999) 11 Australian Journal of Corporate Law 27
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