THE PERMISSIBLE SCOPE OF ARTICLES EXCLUDING THE DUTIES OF COMPANY DIRECTORS

DOIhttp://doi.org/10.1111/j.1468-2230.1976.tb01463.x
Publication Date01 Jul 1976
AuthorJohn Birds
THE PERMISSIBLE SCOPE
OF
ARTICLES
EXCLUDING THE DUTIES
OF
COMPANY
DIRECTORS
ARTICLE
78
in Table
A
of the Companies Act
1948
follows: provides as
“A director of the company may be or become a director or
other officer of, or otherwise interested in, any company promoted
by the company or in which the company may be interested as
shareholder or otherwise, and no director shall be accountable
to the company for any remuneration or other benefits received
by him as a director or officer of, or from his interest in, such
other company unless the company otherwise direct.”
That must be one
of
the least cited Articles contained in Table A;
in fact only one of the leading books on Company Law
(Gore-Browne
on
Cornparries
*)
even mentions it. What does that article mean?
It
is
clearly some sort of exclusion clause, and in fact we are told by the
learned authors
of
the
41st
edition
of
Gore-Brownea that it was inserted
by the draftsman of the
1948
Act to reverse the effect of the House
of Lords decision in
Regd
(Hastings)
Ltd.
v.
Gulliver.”
Presumably it
was felt a harsh result to make company directors accountable for
sccret profits in that type of case; this view is shared by some writers,”
though not by the present author.
A
clause in the Articles is a very convenient way of lessening or cven
getting rid of the duties which the law would otherwise cast upon
company directors. But Article
78
is rather restricted to particular fact
situations. Could the astute draftsman
go
further and produce an
Article purporting to relieve the director in all circumstances from the
duty not to make
a
sccret profit?
For
example, the following clause
might be used, whcn suitably polished up by an experienced
draftsman
:
A director of the company may retain any bcnefit. whether in
the form of profit made by him,
or
otherwise, which he obtains
from an opportunity which comes to him in his position as
director or otherwise. provided that he acts honestly and does not
gain at the expense of the company.”
At this point. the astute student of company law might say, however
-does this not go too far? What about the effect of section
205
of the
Companies Act
1948?
That section surely provides that articles
3
Table
A
Articles apply
of
course
to
all registered cornpahies limited by shares
unless expressly excluded
or
modified-Companies Act 1948,
s.
8.
2
42nd ed. (1972) edited by Boyle and Sykes.
8
Published in 1952 (edited by Sykes, Smith, Smith and Bome), p. 887.
4
(19421
1
All
E.R.
378;
Regal
is,
of
course, the
locus
classicus
on the accountability
of
company directors
for
secret profits made bona fide and where the company did
not suffer,
but
the
profit
was made by virtue
of
their position as directors.
6
Especinlly Jones (1968) 84
L.Q.R.
472; see
also
Gower,
The
Principles
of
Modern
Company
Law
(3rd ed.)
pp.
535-540.
394

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