The Continuing Value of Relief for Directors' Breach of Duty

Abstract

The nature and scope of relief for directors in breach of their duties did not figure prominently in the Steering Group's fundamental review of company law. Little is proposed beyond removing one of the two pre‐conditions for relief laid down in section 727 of the Companies Act 1985; the requirement of reasonableness. This article seeks to subject the relieving discretion to a more radical re‐appraisal. Drawing upon the views expressed by its architects together with the current judicial approach adopted towards the provision, it is argued that its underlying rationale would be better met if the test for relief was based solely upon the court's determination of fairness. It will be demonstrated that such a model would better serve to bolster the fundamental tenets of transparency, simplicity and accessibility that underpin the approach of the Government's White Paper towards company law reform while also reinforcing the continuing value of relief.