Directors: appointment, powers & duties

What "Directors: appointment, powers & duties" covers

• A private company needs at least one director and a public company at least two; every company must have at least one director who is a natural person aged 16 or over (ss.154-157 CA 2006).
• Directors include de jure, de facto and shadow directors (s.251); duties can extend to those who have not been validly appointed.
• The general duties are: act within powers (s.171), promote the success of the company for members' benefit having regard to s.172 factors, exercise independent judgment (s.173), exercise reasonable care, skill and diligence (s.174, dual objective/subjective test), avoid conflicts of interest (s.175), not accept benefits from third parties (s.176), and declare an interest in a proposed transaction (s.177).
• An interest in an existing transaction must be declared under s.182; the s.177 duty concerns proposed transactions before they are entered into.
• Certain transactions need member approval: substantial property transactions (s.190), loans to directors (s.197), and service contracts longer than two years (s.188).
• Breach may be authorised in advance (independent directors, ss.175/177) or ratified afterwards by ordinary resolution of members disregarding the director's own votes (s.239).
• Members may remove a director by ordinary resolution with special notice (28 days) under s.168, subject to any Bushell v Faith weighted-voting clause in the articles.

Key cases & statutes

The authorities and provisions most likely to matter for this subtopic:

How it's tested in SQE1

SQE1 uses single best answer questions: a short factual scenario, one precise question, and five options of which only one is the best answer on the law applied to the facts. For directors: appointment, powers & duties, expect to be asked what the correct legal position is, what a party may or must do, or which outcome follows — with more than one option looking arguable. Reading the facts carefully and eliminating the near-misses is the skill that earns the mark.

Where candidates lose marks

• Confusing s.177 (declare interest in a proposed transaction) with s.182 (existing transaction) — the trigger and timing differ.
• Forgetting that liability under s.175 is strict: Regal and Bhullar show honesty and lack of loss to the company are no defence to an unauthorised profit.
• Assuming removal under s.168 is by special resolution — it is an ordinary resolution but requires special notice, and can be defeated by weighted voting.

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