Duties of directors

In this lesson

1. 0:00 Directors' duties and shareholder protection
2. 0:30 Duty to act within powers and proper purpose
3. 2:14 Promoting company success for members
4. 4:27 Considering stakeholders and long-term interests
5. 4:47 Exercise reasonable care and skill
6. 6:21 Avoiding conflicts of interest
7. 8:52 Independent judgement and decision-making
8. 9:13 Declaring interests in transactions
9. 12:09 Breach of duties and remedies
10. 14:17 Removing directors from office

About this lesson

We'll work through each duty with real case examples—from the Hogg v Cranborne takeover case to Aberdeen Railway v Blaikie Brothers—so you understand not just what the rules are, but how courts interpret them in practice. This is essential knowledge for the Corporate and Business Law paper, and it's tested regularly in both objective and case study questions. The first three duties establish how directors must use their power: acting within the company's constitution and for proper purposes, promoting the company's long-term success with all stakeholders in mind, and exercising reasonable care and skill appropriate to their knowledge and role. You'll see how the Dorchester Finance v Stebbing case shows what happens when directors fail to exercise basic financial control, and why signing blank cheques breaches both general knowledge and specialist standards. The remaining four duties focus on managing conflicts: avoiding conflicts of interest, exercising independent judgment free from undue influence, not accepting benefits from third parties, and crucially, declaring any interest in proposed transactions. The IDC v Cooley case demonstrates how even when a customer explicitly won't deal with the company, a director can't secretly take that contract—and the Aberdeen Railway case shows that undeclared conflicts make contracts voidable, regardless of whether you got a good deal. Finally, you'll learn what happens when duties are breached: only the company (not individual shareholders) can sue, remedies include monetary compensation and return of profits, and shareholders can ratify a director's actions by passing a special resolution—though this won't protect against future claims. We'll finish with an exam-style question on the procedure for removing a director, which tests your understanding of why ordinary resolutions (not special) are used for this routine business decision.

Duration: 16m