Company Law negligence Case Study Example | Topics and Well Written Essays - 1000 words

Comp whatever Law negligence - Case Study ExampleSection 171 CA 2006 provides that directors have a duty to act deep down their powers. A director of a comp all must (a)act in accordance with the company constitution and (b)only operate powers for the purposes for which they are conferred. In the fountain of Re Smith & Fawcett Ltd 1942 Ch 304 it was held that directors must act bona fide in what they consider - not what a court may consider - is in the interest of the co., and not for any collateral purpose.5 Alex, Brad and Carl who are the directors of Zed Ltd owe duties to Zed Ltd and not the employees of the company or anyone else.Since Brad worked as a chemical organise in the company before becoming a director and the other directors complain that he should have known about this innovative technology, it must be addressed to what extent Brads actions were reasonable and whether he had any specialized knowledge to which he should have exercised. As a director, he is obligate d under s.172 CA 2006 to promote the success of the company in a way that he considers to be good faith. He must take into consideration the likely consequences of any decisions in the long term the interests of the companys employees the need to foster the companys business relationships with suppliers, customers and others the impact of the companys operations on the community and the environment the desirability of the company maintaining a record for high standards of business conduct, and the need to act fairly as between members of the company.6 This duty is subjective as per Lord Wilberforce in Howard Smith Ltd v Ampol 1974 AC 821 There is no appeal on merits from mangement decisions to courts of law nor will the courts of law assume to act as a kind of supervisory board everyplace decisions within the powers of maangmeent honestly arrived at.7 In general, the short term view would be that of maximization of profits for shareholders. the long term view considers ultimate proceeds of continued existence of company for all members present and future.8 Each director of Zed Ltd must be seen as taking both into consideration in determining if they were acting bona fide. Moreover, directors not entitled to take into account employee interests as per the case of Parke v Daily News Ltd 1962 2 All ER 929.9 However, new provision introduced that directors were to have regard to the interests of the companys employees in general as well as the interests of its members (s.309 CA 1985).10 However, this section has been widely criticized. The fact that the other directors were accountants would not justify them in any way if they claim to have been solely relying on Brads expertise as s.173 CA 2006 imposes that each director has a duty to exercise