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Article
Publication date: 11 July 2016

Norman Mugarura

The paper aims to examine the circumstances in which directors who fail to perform their duties and responsibilities with due diligence can be sanctioned and to evaluate…

Abstract

Purpose

The paper aims to examine the circumstances in which directors who fail to perform their duties and responsibilities with due diligence can be sanctioned and to evaluate whether the recent changes for reform both in the UK and European Union (EU) are adequate to deter directors from misfeasance or to cure defects in the law. The purpose of this paper is to articulate regulatory regimes for disqualification of corporate directors and the proposed changes to tighten loose ends in this area of commercial law. This paper articulates the duties and responsibilities of Corporate Officer and the varied context in which they are manifested in the UK. Owing to the onerous nature of corporate directorship, directors cannot passively sit in boardrooms or on their committees, but they need to demonstrate that they are hands on to get things done as expected. The first part of the paper articulates the current regimes on director’s disqualification so that it is used as a basis to examine the efficacy of the proposed changes for reform both on this area in the UK and Europe. The second part of the paper examines the proposed reform for change both in UK and in Europe and their efficacy to plug in law and practice. This area of corporate law is increasingly regulated by a number of agencies to ensure that directors perform their duties and responsibilities with due diligence.

Design/methodology/approach

The paper is structured in two parts whereby the first part examines the framework for disqualification of corporate directors and related issues in the UK. The second part articulates recent changes in the law on director’s disqualification with a view to evaluate whether these changes are robust enough to enhance the position of shareholders to ensure the company is well-managed for their interests or whether overregulation is inimical to the company by hindering directors from executing their corporate responsibilities with a measure of discretion.

Findings

The findings reflect that regulatory reforms should be evolved and implemented to strike a balance in ensuring that regulatory regimes are implemented not to penalise corporate directors unnecessarily but also to ensure that rules are respected. The paper urges caution because overregulation can inhibit corporate director from taking necessary risks (to be more guarded) to secure their positions.

Research limitations/implications

The paper was written on the basis of secondary and primary data sources often also alluding to empirical cases studies. It would have been better to carry out structured interviews to corroborate some of the findings of the paper.

Practical implications

Corporate governance is an onerous task, and thus, it requires corporate officers to exercise due diligence in execution of their duties and responsibilities. Getting the issue of corporate governance wrong often has ramifications for the company and respective corporate officers. These ramifications include not least penalising individual directors by disqualification from holding corporate directorship or the company being wound up altogether.

Social implications

Corporation plays an important role in the society such as creating employment opportunities, markets for goods and services, generating revenues to governments and the list goes on. Therefore, the way they are managed has important implications for societies and governments.

Originality/value

Even though the paper was written on the basis of primary and secondary data sources, it was done in a distinctive manner to foster the objective for writing it.

Details

International Journal of Law and Management, vol. 58 no. 4
Type: Research Article
ISSN: 1754-243X

Keywords

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Article
Publication date: 15 March 2013

Alexandra Dobson

The aim of this paper is to seek to examine the operation of S.37 of the Health and Safety at Work Act 1974 in the context of the debate about director's duties for health…

Abstract

Purpose

The aim of this paper is to seek to examine the operation of S.37 of the Health and Safety at Work Act 1974 in the context of the debate about director's duties for health and safety. It goes on to consider whether its increased use is indicative of an inclination on the part of regulators to more readily target senior officers within companies.

Design/methodology/approach

This is a conceptual paper.

Findings

The section has received much attention in recent years because unlike the bulk of the Health and Safety at Work Act 1974 from which it derives, it imposes no positive duties. Its use arises via a secondary duty and only comes into operation following proof of organisational fault. However, this indirect duty is imposed typically against directors and the section is therefore of great interest as part of a wider debate on the imposition of liability at board level.

Originality/value

Drawing on an a review of leading cases and the initial findings from analysis of the response to a Freedom of Information request made to the Health and Safety Executive in February 2012, the use of the section will be placed under the spotlight and considered in the context of other linked statutes.

Details

International Journal of Law and Management, vol. 55 no. 2
Type: Research Article
ISSN: 1754-243X

Keywords

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Article
Publication date: 1 March 1996

Richard Schulte

Improved creditor and community protection seemed attainable goals when Professor Daniel Prentice described s. 214 of the Insolvency Act (‘s. 214’) as ‘one of the most…

Abstract

Improved creditor and community protection seemed attainable goals when Professor Daniel Prentice described s. 214 of the Insolvency Act (‘s. 214’) as ‘one of the most important developments in company law this century’. The profession and academics perceived that wrongful trading in its legislative form had a bright future because it promised to provide much needed protection. ‘Wrongful trading’ was introduced to minimise the abuse of limited liability by company officers. An honest director could not be liable for a company's debt despite reckless, unreasonable and cavalier business practices. Insolvency practitioners were having difficulty establishing dishonesty under the fraudulent trading provisions. The courts demanded a strict standard of proof for fraudulent trading and many cases never made it to court despite a prospect of recovery against directors. Wrongful trading by comparison is a recent development that, in theory, refines the standard of a director's duty and clarifies that conduct need not be fraudulent, illegal or unconscionable to attract legislative censure. Section 214 measures a director's conduct against a minimum standard of commercial morality and competence.

Details

Journal of Financial Crime, vol. 4 no. 1
Type: Research Article
ISSN: 1359-0790

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Article
Publication date: 15 March 2013

Lyndon Murphy

The purpose of this paper is to explore the relationship between social capital and the directors' duty to promote the success of the company and to foster business…

Abstract

Purpose

The purpose of this paper is to explore the relationship between social capital and the directors' duty to promote the success of the company and to foster business relationships, which is a comparatively under‐researched issue.

Design/methodology/approach

The approach taken focuses on the concept of social capital, its various forms and influence on business performance. Ultimately, the paper explores ways in which directors' duties as stated in s.172 (1) of the Companies Act 2006 may affect the building and maintenance of forms of social capital.

Findings

It seems that it is likely that by complying with s.172 (1) directors will build forms of social capital, which in turn will enhance the business performance of companies in aspects such as innovative activity, transaction costs, and productivity. Consequently, the building of social capital is likely to promote the success of the company.

Originality/value

It can be stated that s.172 (1) CA 2006, is a potentially paradigmatic move in the way in which company directors undertake their business and view their company's stakeholders (Dignam and Lowry). Davies appears to agree with this view commenting upon the “ideological significance” of the introduction of s.172. It certainly seems that the inclusion of a duty to consider the importance of fostering business relationships implicitly promotes the pursuit of social capital.

Details

International Journal of Law and Management, vol. 55 no. 2
Type: Research Article
ISSN: 1754-243X

Keywords

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Article
Publication date: 5 January 2015

Charles KN Lam and S.H. Goo

The purpose of this paper is to demonstrate how Confucianism can be applied in the areas that are now governed by company law in the common law system and how it can play…

Abstract

Purpose

The purpose of this paper is to demonstrate how Confucianism can be applied in the areas that are now governed by company law in the common law system and how it can play a role in improving corporate governance. A gentleman in the context of Confucianism tends to be inclusive and broad-minded in embracing the interest of different stakeholders. In fact, he will balance the interests of shareholders and other stakeholders if there is any inherent conflict and try to achieve a win-win situation. Ultimately, he will run the company not just for profit-making but for social justice and commitment.

Design/methodology/approach

The authors examine the leading cases in Hong Kong and the United Kingdom about the law of fiduciary duty and the duty of care and its relationship with Confucianism. In this respect, we review the teachings of the traditional Confucian texts and use Confucianism to fill in the gap where common law rules cannot reach. In addition, we adopt a comparative study approach in examining the law of directors’ duties in Hong Kong, China and the United Kingdom.

Findings

It can be seen that the concept of fiduciary duty and duty of care is quite complicated and evolving and always subject to the interpretations of the court from time to time. For fiduciary duty, the term itself is quite conceptual and not immediately available to the general public. But loyalty in the context of Confucianism is a very lively and down-to-earth moral principle. Besides, fiduciary duty is imposed from outside, where directors had no choice but to accept. But loyalty in the context of Confucianism is something inherent and something from within. It is a moral principle that if you deeply understand the meaning of it, you will automatically accept it as a good virtue and your conduct will naturally be guided by such a principle. Confucianism can thereby be used to fill the gap where rules and regulations cannot reach. Confucian business ethics and common law rule should be complementary to each other in the development of a Chinese corporate governance system.

Originality/value

This paper is the first of its kind in discussing the relationship between the law of directors’ duties and Confucianism. It argues that Confucianism plays a crucial role in guiding the behavior of the directors and can supplement the abstract principles of directors’ duties in the context of a Chinese corporate governance system.

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Article
Publication date: 1 June 1973

ELIZABETH ACKROYD

This monograph identifies five essential elements for an effective policy to promote consumer interests viz. protection, information, advice, education and representation…

Abstract

This monograph identifies five essential elements for an effective policy to promote consumer interests viz. protection, information, advice, education and representation. The author explores each in considerable depth to assess the extent to which this year's Fair Trading Act will contribute to them. Her verdict is that although not as much as might be hoped will be achieved, by and large the Act is a useful measure. It should bring a higher standard to trade practices particularly in the field of selling and promotion. But it can do little to provide consumer education or representation and these the author considers to be major omissions from the present consumer scene.

Details

Management Decision, vol. 11 no. 6
Type: Research Article
ISSN: 0025-1747

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Article
Publication date: 31 December 2015

Fang Ma

The purpose of this paper is to assess the application of the nascent corporate opportunity doctrine in China by comparison with its well-established English counterpart;…

Abstract

Purpose

The purpose of this paper is to assess the application of the nascent corporate opportunity doctrine in China by comparison with its well-established English counterpart; in particular, it evaluates whether the fine balance between business integrity and business efficiency has been struck.

Findings

It is argued that the scope of application of the corporate opportunity doctrine in China should be extended, and the rules on the burden of proof should be amended. Moreover, a stricter approach should be adopted by the Chinese judiciary for the purpose of protecting the company’s interests and enhancing business integrity.

Research limitations/implications

This paper mainly focuses on the corporate opportunity doctrine. It does not discuss other duties of directors in detail.

Practical implications

It is useful for directors in balancing business integrity and business efficiency.

Originality/value

It is an original piece of work which assesses the corporate opportunity doctrine by making comparison with English law.

Details

Journal of Financial Crime, vol. 23 no. 1
Type: Research Article
ISSN: 1359-0790

Keywords

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Article
Publication date: 11 April 2008

Peter Waring

This paper aims to examine whether directors duties, as they are typically presented in Anglo‐American corporations law, remain appropriate and relevant given recent

Abstract

Purpose

This paper aims to examine whether directors duties, as they are typically presented in Anglo‐American corporations law, remain appropriate and relevant given recent corporate governance developments and trends in global product and capital markets.

Design/methodology/approach

The paper employs a comparative approach, examining aspects of corporate governance developments in the UK, the US and Australia.

Findings

The paper finds that product and capital markets are increasingly placing a premium on good corporate social responsibility and hence, Anglo‐American corporations law should be reformed to clarify directors' capacity to address broader stakeholder concerns.

Originality/value

The paper provides a comprehensive summary of important currents in contemporary corporate governance and provides a market‐driven justification for changing corporations law.

Details

Corporate Governance: The international journal of business in society, vol. 8 no. 2
Type: Research Article
ISSN: 1472-0701

Keywords

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Article
Publication date: 1 January 1977

A distinction must be drawn between a dismissal on the one hand, and on the other a repudiation of a contract of employment as a result of a breach of a fundamental term…

Abstract

A distinction must be drawn between a dismissal on the one hand, and on the other a repudiation of a contract of employment as a result of a breach of a fundamental term of that contract. When such a repudiation has been accepted by the innocent party then a termination of employment takes place. Such termination does not constitute dismissal (see London v. James Laidlaw & Sons Ltd (1974) IRLR 136 and Gannon v. J. C. Firth (1976) IRLR 415 EAT).

Details

Managerial Law, vol. 20 no. 1
Type: Research Article
ISSN: 0309-0558

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Article
Publication date: 5 October 2012

Fincy Pallisserry

Transparency of financial information promotes corporate growth. The purpose of this paper is to concentrate on the need for strengthening the law governing true and fair…

Abstract

Purpose

Transparency of financial information promotes corporate growth. The purpose of this paper is to concentrate on the need for strengthening the law governing true and fair corporate accounting. The first part of the paper concentrates on nexus between the importance of transparency in accounting embodied under the provisions of the Companies Act in India and in the UK. Second, the paper focuses on the board of director's duty to prevent corporate fraud through proper financial reporting.

Design/methodology/approach

The methodology for this study is analytical. Comparative study of the law governing accounting provisions in India and UK is also looked into.

Findings

The law governing financial transparancy envisaged under the Companies Act in India makes it obligatory on the part of the companies to disclose the material information relevant to the investors. However, the directors of the company often show an unreal picture of the financial position of the company, so as to retain the existing shareholders and to attract more investors. This can be avoided if the composition of audit committees in the companies includes a few representatives of shareholders who are competent to asses the true and fair view of the company accounts prepared by the auditors.

Research limitations/implications

The focus of this research paper is mainly on the legal regimes and the accounting and auditing provisions of India and the UK.

Originality/value

The paper shows that the Companies Act in India should strengthen the accounting provisions and it should mandate the compulsory observance of accounting standards.

Details

Journal of Financial Crime, vol. 19 no. 4
Type: Research Article
ISSN: 1359-0790

Keywords

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