Directors' duties in the United Kingdom

[2] There are presently seven key duties codified under the Companies Act 2006 sections 171 to 177, which reflect the common law and equitable principles.

[3] The remedies for breaches of duty were not codified, but follow common law and equity, and include compensation for losses, restitution of illegitimate gains and specific performance or injunctions.

The courts emphasise that they will not judge business decisions unfavourably with the benefit of hindsight,[10] however simple procedural failures of judgment will be vulnerable.

The central equitable principle applicable to directors is to avoid any possibility of a conflict of interest,[12] without disclosure to the board or seeking approval from shareholders.

This core duty of loyalty is manifested firstly in section 175 which specifies that directors may not use business opportunities that the company could use, unless they have approval.

Even though the directors used their votes as shareholders to "ratify" their actions, the Privy Council advised that the conflict of interest precluded their ability to forgive themselves.

[18] If such a self dealing transaction has already taken place, directors still have a duty to disclose their interest and failure to do so is a criminal offence, subject to a £5000 fine.

[28] Proof of subjective bad faith toward any group being difficult, directors have the discretion to balance all competing interests, even if to the short term detriment of shareholders in a particular instance.

Section 172's criteria are useful as an aspirational standard because in the annual Director's Report companies must explain how they have complied with their duties to stakeholders.

[30] Also, the idea of whether a company's success will be promoted is central when a court determines whether a derivative claim should proceed in the course of corporate litigation.