Tuesday 4 February 2014

UK: England and Wales: three cases on directors' duties

The duties of directors have recently been considered in a trio of High Court decisions. In the first, Pullan v Wilson [2014] EWHC 126 (Ch), the court considered the operation of section 176 of the Companies Act 2006, which imposes a duty on directors not to accept benefits from third parties. The case concerned a trustee who had been appointed a non-executive director of several companies in which the trusts had invested. The judge held that section 176 did not apply because the benefits in question were received by the individual in his capacity as trustee; the benefits were not conferred because the individual was a director or doing anything as a director.

In the second case, The Northampton Regional Livestock Centre Co Ltd v Cowling [2014] EWHC 30 (QB), a director was held in breach of duty where he placed himself in a position of conflict by acting for both the vendor and purchaser in a commercial property transaction. The judgment contains some interesting discussion of the operation of section 1157, under which the court has the power to grant a director relief from liability in respect of negligence, default, breach of duty or breach of trust. Finally, in the third case, Elsworth Ethanol Company Ltd v Hartley [2014] EWHC 99 (IPEC), it was argued that that three individuals were de facto directors and that they had acted in breach of duty. The court rejected this argument, finding that the three individuals were not de facto directors of a company.

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