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Company Act

  • Date Submitted: 05/31/2010 03:29 PM
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For the prevention of any abuse of powers by the directors a number of duties were developed during the years by the courts. Before the enactment of the Companies Act (CA) 2006, director’s duties could be found in common law principles and also in some pieces of legislation. However, the CA 2006 which was given Royal assent on November 8, 2006, had codified these duties and as a result made the law on director’s duties more accessible and clearer. The director’s duties today can be found in sections 170 to 177 of the CA 2006.   Among these duties is the duty to promote the successes of the company which can be found in section 172 and on which we are going to concentrate in this essay.   In our essay, we are going to analyse section 172 and examine whether the enlightened shareholder value (ESV) approach which section 172 adopts can be consider as a good principle for the various stakeholders of the company.

Before moving on and examine, what section 172 requires from directors, we need first to consider how this section was developed. To start with, before the enactment of the Companies Act 2006 there has been a long debate in the United Kingdom, whether the directors, except from the interests of shareholders should have to take into consideration the interests of those other groups who have stakes in the company such as suppliers, customers, and the environment and the community in general The Company Law Review Steering Group (CLRSG) which was set up by the government, addressed two approaches which could be adopted by the UK Company Law, the pluralist approach and the enlightened shareholder approach. The pluralist approach requires the directors not to give priority to the interests of the shareholders but balance them with the interests of the other stakeholders. Whereas, the other approach addressed, the enlightened shareholder approach requires from the directors to take decisions for the best interests of the shareholders but...


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