Directors’ duties: a strict reminder

The recent Court of Appeal judgment in Towers v Premier Waste Management Ltd serves as a stark warning to directors who are not strictly compliant and wholly knowledgeable of their duties.

In this case, a director of a waste management company accepted a free of charge loan of plant and equipment to renovate his house from one of the company’s customers without disclosing it to the company. He argued that the arrangement was “private, informal, ad hoc and amongst friends”.

The Court of Appeal held that the director had breached his fiduciary duties (particularly the duty of loyalty and the duty to avoid conflicts of interest). The director was ordered to pay to the company an amount representing what it would have cost him to hire the equipment on the open market, along with the costs of the action.

The director was held to have acted disloyally towards the company. It was irrelevant that the company did not suffer any loss, that the director did not make a valuable profit, that he did not act in bad faith or that, had the loan not been available, he would have not hired the equipment at commercial rates.

The Companies Act 2006 clearly sets out and re-defines directors’ duties and this decision acts as a harsh reminder to directors of the high threshold of caution required in approaching situations that could potentially lead to a breach of fiduciary duties. Disclosure in every situation is paramount.

Bribery Act

The UK Bribery Act, which came into force on 1^st July, is one of the most significant statutes enacted in the last 10 years.   The Act establishes a criminal offence for non-compliance, with heavy penalties including unlimited fines and prison sentences.

For all businesses operating in the UK, the Bribery Act should be of concern, particularly to senior management, and even the most scrupulous. All businesses should reconsider their compliance programmes, if they have not done so already.

 All UK businesses should know what to do to avoid falling foul of the law and all businesses should have an established compliance programme.

 The Act introduces four main offences:

•  making bribes;
• receiving bribes;
• bribery of foreign public officials; and
•  the corporate offence of failing to prevent bribery (where the only defence is of having ‘adequate procedures’ in place to prevent bribery).

 The Act has created the following penalties:

•  Companies – an unlimited fine
•  Individuals – up to 10 years imprisonment, an unlimited fine or both
•   Companies who are involved in public contract work could be debarred from tendering for public procurement contracts
•   Directors may also be subject to a variety of risks, including prosecution as an officer of a company involved in bribery, and potentially disqualification from acting as a director

 Companies can be liable where offences are committed by their employees, joint venture partners, contractors or agents.  The only defence is that the business had in place adequate procedures to prevent bribery.

 Companies need to ensure they can bring themselves within the adequate procedures defence to the corporate offence of failing to prevent bribery.  This will require the introduction and implementation of appropriate anti-bribery and corruption policies and procedures.

Beware your emails!

Recent cases coming out of the Supreme Court and Court of Appeal are showing that commercial negotiations marked “subject to contract” can be binding . Other recent cases highlight that the absence of those words will not necessarily imply a concluded contract.

Most of these recent cases are based on establishing contractual relationships by email. As a consequence of the instantaneous and “throwaway” nature of emails many people forget that a legally binding contract can be concluded this way.

It is vital that you phrase your email communications with utmost care otherwise you could find that you have inadvertently entered into a binding contract when you thought you hadn’t , or that what you thought was a concluded and binding contract is not .
For further detailed information on this please refer to the following case :-

Golden Ocean Group Limited v Salgaocar Mining Industries Pvt Ltd & Anor
[2011] EWHC 56 (Comm)

A talk through with your legal adviser first is always recommended .

Please contact anyone in our Corporate Commercial team for assistance on 0161 832 6972 or law@lindermyers.co.uk