Regulating the Conduct of Directors

Abstract

Before the enactment of the Companies Act 2006 there was no statutory statement of directors' duties in UK law. Whether or not such a statutory statement should exist had been the subject of academic debate for over a century. The arguments for and against the codification of directors' duties were considered by the Law Commissions and subsequently by the Company Law Review prior to 2006. Their considerations informed the drafting of the Companies Bill, which when it was enacted replaced the existing common law duties with seven statutory duties. The move from common law to codified duties was seen as necessary to ensure better corporate governance, and therefore better corporate responsibility, in the changed corporate landscape of the modern era. Although the codified duties have only recently come into force, they are already facing significant tests, which are being presented by the current financial crisis. The Companies Act 2006 has struck a new balance between companies and society, and it is hoped that by that new balance companies and society may reconnect.