Reforming Directors’ Duties

Abstract

Introduction: Taken together, the English and Scottish Law Commissions, the DTI and the Company Law Review Steering Group (‘CLRSG’) have produced hundreds of pages on the subject of directors’ duties during the last three years. All of this work is just a small part of the DTI’s current review of the whole system of core company law, a review billed as the most comprehensive ever undertaken in the UK. This note cannot do justice to the detailed work of all these bodies, but aims simply to summarise the principal directions of the work so far produced – and only so far as it relates to directors’ duties – and to highlight some aspects which give cause for concern. In doing that, it is consciously biased towards consideration of the perceived problems, rather than praise for noteworthy advances. The reason is simple. This mammoth review process is not yet completed. The CLRSG is due to produce its final report in Spring 2001. Before that date, it seems important to cast a critical eye over the work completed so far. That said, it would be surprising if the CLRSG did not already intend to address some of the issues raised here. Its work to date has always been presented as part of a consultation process aimed at discovering the optimum solution. The need for a comprehensive reform of UK company law is not doubted. The UK rules have long ceased to provide an enviable model for other countries to adopt. The current companies legislation is widely regarded as being too complex and detailed, and as containing rules which are now either obsolete or unwarranted. The DTI’s stated aim is to produce a simple, rational framework which is modern and competitive, and which facilitates enterprise and promotes transparency and fair dealing. It is against this that its efforts need to be judged.