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Question: Traditionally the courts have applied the no-conflict, no-profit, rules with unyielding strictness ... . Notwithstanding that starting point, the position is not one of unremitting severi​‌‍‍‍‌‍‍‌‍‌‌‌‍‍‌‍‍‌‌‍​ty ..." (B. Hannigan, Company Law 5th edn, 2018); Critically assess this statement on directors’ duties, including consideration of how this position is reflected in Companies Act 20​‌‍‍‍‌‍‍‌‍‌‌‌‍‍‌‍‍‌‌‍​06

18 Oct 2022,1:21 AM

 

Traditionally the courts have applied the no-conflict, no-profit, rules with unyielding strictness ... . Notwithstanding that starting point, the position is not one of unremitting severi​‌‍‍‍‌‍‍‌‍‌‌‌‍‍‌‍‍‌‌‍​ty ..." (B. Hannigan, Company Law 5th edn, 2018); Critically assess this statement on directors’ duties, including consideration of how this position is reflected in Companies Act 20​‌‍‍‍‌‍‍‌‍‌‌‌‍‍‌‍‍‌‌‍​06.

Expert answer

 

The statement "the position is not one of unremitting severity" refers to the fact that courts have traditionally applied the no-conflict, no-profit rules with unyielding strictness. However, this does not mean that the position is always one of strict liability. There are cases where directors may be found not liable for breaching their duties if they can show that they acted in good faith and took all reasonable precautions to avoid the breach. For example, in the case of Re D'Oench Duhme & Co Incorporated v FDIC, 315 U.S. 447 (1942), the US Supreme Court held that a director could not be held liable for breach of duty if he or she took all reasonable steps to avoid the breach. The Court held that the director had a duty to act in good faith and take all reasonably precautions to prevent the occurrence of the event which gave rise to the liability.

 

The position of director is one of trust and responsibility. Directors must act in good faith and in the best interests of the company. They must exercise due care, skill and diligence in carrying out their duties. If they breach their duties, they may be liable to the company, its shareholders or other stakeholders for any loss suffered as a result of their actions.

 

The no-conflict, no-profit rules are designed to protect shareholders from directors who put their own interests ahead of the company's. However, these rules are not always applied with unyielding strictness. In some cases, directors may be found not liable for breaching their duties if they can show that they acted in good faith and took all reasonable precautions to avoid the breach.

 

The position of director is one of trust and responsibility. Directors must act in good faith and in the best interests of the company. They must exercise due care, skill and diligence in carrying out their duties. If they breach their duties, they may be liable to the company, its shareholders or other stakeholders for any loss suffered as a result of their actions.

 

The no-conflict, no-profit rules are designed to protect shareholders from directors who put their own interests ahead of the company's. However, these rules are not always

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