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P. V.
S. Directors’ Doties
those with a stake in the business). ESV recognizes taking other interests into account can enhance the success of the company which s. benefit shareholders, but under ESV these factors are relevant so far as they achieve that aim; they are not pursued for their own merits. It is for the directore’ judgment how far those factors are relevant, If at all, In promoting the company’s success for the members’ benefit. Lynch thus argues s.17z makes no meaningful difference (‘Section 172: a ground-breaking reform of directors’ duties, or the Emperor’s N. Clothes, (2.2) 33 Co Law].) while a study of FTSE 100 companies concluded ESV has had little Impact on the sample companies’ operation or reporting (Keay and lqbal, ‘The .pact of enlightened shareholder value’ (20.11BL 3041 The recently added requirement for directors of large companies to describe in the strategic report (s. 414A) how they have had regard to the factors (s. 424C2A) seems unlikely to make much difference.’
7 If you had time this would be a good place to explore the academic discussion In more depth
Bemuse the duty is owed to the company, breach of s. 172 is enforceable only through the company; groups…. the s. 172(1) list have no right of action. Even if an action.. brought in respect of a failure to take account of a s. 1720, factor, it might be hard to establish any resultant loss to the company. Breach of s. 1721a . any care difficult to establish because of its subjective nature, requiring only that dirretore act in the way they believe is appropriate. It is hardly surprising that the major impact of s. 172 is thought tot educative °My.
The position becomes .bit more complex with regard to creditors. Directors do not owe duties to creditors, whether individually or collectively (Midtinati.olG..d Petrochemical Co v Multinational Gm and Petrochemical Service, Ltd Do831Ch 258; Kuwait Aria Bank EC v National Mutual Lite Nominees Ltd (toot) tAC ay). However, in West Memia Safety… v Dodd (.88) BCLC 25o the court adopted the statement in Kansa. v Russell Kimela Pty Ltd 1,98614 NSWR722 (Motel.) that where a company is insolvent directors must have regard to creditors’ interests. This does not mean that a duty is owed to creditors directly (ern zot4 LLCv Sequa… f2orolEWCA Ltiv tt“Sequatml); instead creditors’ interests displace those of the members: ‘It is in a practical sense their asrere and not the shareholders’ assets that, through the medium of the company, are under the management of the directors’ (Street CI .Ki.elo). This is triggered by insolvency, ‘doubtful solvency or… the verge of .solvency. (Colin Gwyer and Associates Ltd v London Wharf (Llmehouse) Ltd boo, 2 BC.LC t53), or where directors Imow or should …that the company is or is likely to become insolvent (Seq.., Further, InsolvencyAct.86, s.214 imposes liability on a direct, who permits the company to continue to trade beyond the point when s/he knew or ought to have known there was no reasonable prospect of avoiding insolvent liquidation. This is eMorced through the liquidator and benefits .secured creditors generally, rather than specific creditors.
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5. Directors’ Dub.
8 Be careful not to spend time going Into IA 1986, s. 2t4 in depth—its relevance here is In its overlap with duties to credit.
The developing state of the law relating to credit. is reflected in s.172(3). This provides that the