Chapter 6Companies■if the situation cannot reasonably be regarded as likely
to give rise to a conflict of interest; or
■where the matter has been authorised by the directors.
This could be problematic for those who hold director-
ships in different companies.
Duty not to accept benefits from third parties
Section 176 applies and provides that a director must
not accept a benefit from a third party conferred by
reason of:
■being a director; or
■doing or not doing anything as a director.
This deals with bribes and personal benefits. There may
be board authorisation.
Duty to declare interest in proposed transaction
or arrangement
Section 177 states that a director who is directly or
indirectly interested in a proposed transaction with the
company must declare the nature and extent of the inter-
est. There is also, as we have noted, a separate regime for
disclosure in s 182 (and subsequently) backed by criminal
sanctions for non-compliance.
Shareholders’ claim on behalf of
the company
We have already described the effect of the new derivat-
ive claim on behalf of the company so that it is no longer
necessary to find a gap in Fossv Harbottle(1843), where
the wrongdoing directors had also to be the controlling
shareholders in the company. The new claim does not
require this.
Corporate indemnification of directors
New provisions relating to the indemnification of directors
appeared in the Companies (Audit Investigation and
Community Enterprises) Act 2004. They were brought
into force on 6 April 2005. These provisions have now
been transferred to the CA 2006 and appear in Chapter
7 of Part 10. They are as follows:
■For liabilities in connection with claims brought by
third parties both legal costs as they are incurred and
judgment costs can be paid by the company even if
judgment goes against the director. The only exclusions
will be criminal fines and fines by regulators, and the
legal costs of unsuccessful criminal proceedings. Thus
a director could be indemnified against the costs of
legal proceedings brought against him by the Financial
Services Authority in regard to a breach of the Listing
Rules governing the listing of shares on the Stock
Exchange. However, no indemnity could be given in
regard to a civil fine imposed by the FSA if the director
was found to have infringed the rules.
■Companies are allowed to pay a director’s defence costs
as they are incurred, even where the claim is brought
by the company. However, if the director’s defence is
unsuccessful, he or she will have to pay the company
its damages and repay to the company any defence
costs paid by the company as the case proceeded.
■The prohibition on companies indemnifying their
company secretaries and managers is removed totally.
■All indemnities must be disclosed in the directors’
annual report and indemnity agreements must be
available for inspection by members.Relief from liability: effect of s 1157The company cannot excuse a director from liability
altogether, but the court can under s 1157 of the CA- The director is required to show to the court the
following:
■that he or she acted honestly and reasonably; and
■that, having regard to all the circumstances, he or she
ought fairly to be excused.
Directors’ meetingsNotice of board meetings must be given to all directors
unless they are out of the UK. Unless the articles other-
wise provide, any director can call a board meeting.Quorum
This is a matter for the articles but a usual provision is
that the quorum necessary for the valid transaction of
business by the directors may be fixed by the directors
themselves and unless it is so fixed then the quorum is
two directors personally present.Voting
Unless the articles say differently, each director has one
vote and resolutions of the board require a majority of
only one. If there is an equality of votes, the resolution is
lost unless the chairman has and exercises a casting vote
in favour of the resolution.187