A person disqualified from acting as a company director might exceptionally be given permission to act as non-executive director in named companies where this appeared necessary and the cause of the original disqualification was unrelated.
As to the duties of directors, Jonathan Parker J said: ‘(i) Directors have, both collectively and individually, a continuing duty to acquire and maintain a sufficient knowledge and understanding of the company’s business to enable them properly to discharge their duties as directors. (ii) Whilst directors are entitled (subject to the articles of association of the company) to delegate particular functions to those below them in the management chain, and to trust their competence and integrity to a reasonable extent, the exercise of the power of delegation does not absolve a director from the duty to supervise the discharge of the delegated functions. (iii) No rule of universal application can be formulated as to the duty referred to in (ii) above. The extent of the duty, and the question whether it has been discharged, must depend on the facts of each particular case, including the director’s role in the management of the company.’
and ‘In considering the question of unfitness, the respondent’s conduct must be evaluated in context- ‘taken in its setting’ . . It follows . . that the court will assess the competence or otherwise of the respondent in the context of and by reference to the role in the management of the company which was in fact assigned to him or which he in fact assumed, and by reference to his duties and responsibilities in that role. Thus the existence and extent of any particular duty will depend upon how the particular business is organised and upon what part in the management of that business the respondent could reasonably be expected play (see Bishopsgate Investment Management Ltd (in liq) v. Maxwell (No 2) [1993] BCLC 1282 at 1285 per Hoffmann LJ) . . Thus while the requisite standard of competence does not vary according to the nature of the company’s business or to the respondent’s role in the management of that business- and in that sense it may be said that there is a ‘universal standard- that standard must be applied to the facts of each particular case. Hence to say that the Act envisages a ‘universal’ standard of competence applicable in all circumstances takes the matter little further since it says nothing about whether the requisite standard has been met in any particular case. What can be said is that the court, whilst taking full account of the demands made upon a respondent by his management role, will recognise incompetence in whatever circumstances and at whatever level of management it occurs, from the chairman of the board down to the most junior director.’
and: ‘In my judgment it can be no defence to a charge of unfitness based on incompetence for a respondent to contend that even if he was grossly incompetent in discharging the management role in fact assigned to him, or which he in fact assumed, nevertheless he has not been shown to be unfit to be concerned in the management of any company, since it is possible to conceive of a management role (whether in the company or companies in question or in some other company altogether-real or imagined) which he could have performed competently-what I might call the ‘lowest common denominator’ approach. In the context of an issue as to unfitness it is neither here nor there whether a respondent could have performed some other management role competently. That is not the test of ‘unfitness’ for the purposes of s 6 (although of course it may be a relevant factor in the context of an application for leave under s. 17 of the Act . .). Under s. 6 the court is concerned only with the conduct in respect of which complaint is made, set in the context of the respondent’s actual management role in the company. If in his conduct in that role the respondent was guilty of incompetence to the requisite degree, then a finding of unfitness will be made and (under s 6) a disqualification order must follow . .’
Judges:
Jonathan Parker J
Citations:
Gazette 25-Nov-1998, [1999] 1 BCLC 433
Statutes:
Company Directors Disqualification Act 1986 17
Jurisdiction:
England and Wales
Cited by:
Appeal from – In re Barings plc (No 5) CA 2000
A finding of breach of duty is neither necessary nor of itself sufficient for a finding of unfitness. As the judge (at first instance) observed a person may be unfit even though no breach of duty is proved against him or may remain fit . .
Cited – The Secretary of State for Trade and Industry v Goldberg, Mcavoy ChD 26-Nov-2003
The Secretary of State sought a disqualification order. The director argued that one shoul not be made in the absence of some breach of legal duty, some dishonesty should be shown.
Held: The answer was a mixture of fact and law. A breach of . .
Cited – Fassihim, Liddiardrams, International Ltd, Isograph Ltd v Item Software (UK) Ltd CA 30-Sep-2004
The first defendant (F) had been employed by a company involved in a distribution agreement. He had sought to set up a competing arrangement whilst a director of the claimant, and diverted a contract to his new company.
Held: A company . .
Cited – Ultraframe (UK) Ltd v Fielding and others ChD 27-Jul-2005
The parties had engaged in a bitter 95 day trial in which allegations of forgery, theft, false accounting, blackmail and arson. A company owning patents and other rights had become insolvent, and the real concern was the destination and ownership of . .
Cited – Secretary of State for Business Innovation and Skills v Aaron and Others ChD 10-Dec-2009
The claimant sought a disqualification after the defendants had been directors of a company mis-selling Structured Capital at Risk products. The FSA had reported that they had been negligent.
Held: ‘I do not have to decide whether or not the . .
Lists of cited by and citing cases may be incomplete.
Company
Updated: 24 April 2022; Ref: scu.81737