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

Company Law negligence - Case Study Example branch 171 CA 2006 provides that directors have a duty to act within their powers. A director of a political party must (a)act in accordance with the company constitution and (b)only exercise powers for the purposes for which they atomic number 18 conferred. In the case of Re Smith & Fawcett Ltd 1942 Ch 304 it was held that directors must act bona fide in what they consider - non what a judicial system 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 chemic engineer in the company before becoming a director and the other directors complain that he should have known about this new 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 obligated under s.172 CA 2006 to promote the success of the company in a way that he considers to be wide faith. He must take into consideration the likely consequences of any decisions in the long term the interests of the companys employees the deficiency 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 reputation for high standards of business conduct, and the need to act fairly as between members of the company.6 This duty is inseparable 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 wit over decisions within the powers of maangmeent honestly arrived at.7 In general, the short term view would be that of maximation of profits for shareholders. the long term view consi ders ultimate benefit of continued existence of company for each(prenominal) 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 excuse 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