Principle 6 of the Proposed Statement of Directors' Duties
| Date | 01 November 2003 |
| Published date | 01 November 2003 |
| DOI | http://doi.org/10.1046/j.1468-2230.2003.06606006.x |
| Author | Pearlie Koh |
REPORTS
Principle 6 of the Proposed Statement
of Directors’ Duties
Pearlie Koh
The Company Law Review Steering Group (CLRSG) presented its Final Report
1
to
the Secretary of State in mid-2001. To this, the Government has published its
response in a White Paper.
2
Schedule 2 to the proposed Companies Bill,
3
is stated to
lay down the ‘general principles by which directors are bound.’ This note considers
specifically principal 6, which is an attempt at codifying what appears to be two
specific sub-rules of the director’s fiduciary duty of loyalty, one being the rule against
unauthorised profit-making from use of the director’s office. The other being the rule
against the misappropriation of corporate ‘property.’
4
The proposed principle states:
Personal use of the company’s property, information or opportunity
A director or former director of a company must not use for his own or anyone
else’s benefit any property or information of the company, or any opportunity
of the company which he became aware of in the performance of his functions
as director, unless –
(a) the use has been proposed to the company and the company has consented to
it by ordinary resolution; or
(b) the company is a private company, the use has been proposed to and authorised
by the board, and nothing in the constitution invalidates that authorisation; or
(c) the company is a public company, its constitution includes provision enabling
the board to authorise such use if proposed, and the use has been proposed to
and authorised by the board in accordance with the constitution.
Notes
(1) In this paragraph ‘the board’ means the board of directors acting without the
participation of any interested director.
(2) This paragraph does not apply to a use to which the director has a right under
a contract or other transaction that he has entered into with the company, or
that he has in the performance of his functions authorised, procured or
permitted the company to enter into.
In the Final Report, the CLRSG explained that a legislative statement of directors’
duties will not only provide ‘greater clarity’ vis-a
`-vis what is expected of directors,
Department of Law, Singapore Management University. I am grateful for the constructive
comments provided by the anonymous referees.
1 CLRSG,Modern Company Law for a Competitive Economy: Final Report (2001, URN 01/942 (vol
1) and 01/943 (vol 2)) (‘Final Report’).
2Modernising Company Law Cm 5553 (‘MCL’). See R. Goddard, ‘ ‘‘Modernising Company Law’’:
The Government’s White Paper’ (2003) 66 MLR 402.
3 MCL – Draft Clauses, Cm 5553-II.
4 See generally R. P. Austin, ‘Fiduciary Accountability for Business Opportunities’ in P. D. Finn
(ed), Equity and Commercial Relationships (Sydney: The Law Book Company Limited, 1987) 142
ff for a succinct exposition of the director’s fiduciary obligations.
rThe Modern Law Review Limited 2003. (MLR 66:6, November). Published by Blackwell Publishing Ltd.,
9600 Garsington Road, Oxford OX4 2DQ, UK and 350 Main Street, Malden, MA 02148, USA.
894
To continue reading
Request your trial