The purpose of this essay is to advise Bubble as to the potential breaches of duties
which Ang might have committed. In this essay one will first identify whether or not
Ang is a director. Next one will determine the potential breaches committed by Ang.
In dealing with the issue on whether or not Ang is a director, Section 250 of
the Companies Act 2006 provides that a director includes any person occupying
the position of director by whatever name called. On the facts, it is clearly stated that
he is a managing director of Bubble Ltd, thus it will be very probable that he will be
managing the company on a daily basis and making all day to day decision of the
company. Hence Ang will be considered as the executive director and therefore a
director under Section 250 of the 2006 Act.
As Ang is a director of Bubble Ltd, he therefore owes fiduciary duties to the
company as per the case of Percival v Wright, which includes shareholders which
can be seen in the case of Greenhalgh v Ardene Cinemas. The duties are set out
and codified in Section 171 to Section 177 of the Companies Act 2006 and it is
provided under Section 170(4) of the same Act that relevant case laws are still
applicable to interpret the aforementioned provisions.
As the issue on whether or not Ang is a director is dealt with, now it is
required to determine whether or not Ang had breached his fiduciary duty to exercise
skill, care and diligence provided under Section 174 of the Companies Act 2006.
Section 174 is the statutory codification of the common law standard of care
expected of directors and this duty was originally introduced by way of intermittent
theory by Sterling J in the Marquis of Bute's case which was further extended by
Romer LJ in Re City Equitable Fire Insurance Co Ltd where the first guideline
states that a director need not exhibit in the performance of his duties a greater
, degree skill than may reasonably be expected of him. Currently, in order to
determine whether a director is in breach of his duty in exercising care, skill and
diligence, a higher standard have been imposed under Section 174(2) of the
Companies Act 2006 where 174(2)(a) is measured against the conduct expected of
a reasonably diligent person carrying out that director's function.
In the current case, a reasonably diligent director would have immediately act
upon by telling the management team or the other director of the company about this
opportunity regarding the expansion of business once they were approached by
other companies. They would have taken action to conduct a meeting to decide
about this matter as it is an opportunity for the company to become more successful,
they would not have acted in the same way as Ang by delaying it and subsequently
forgot about this opportunity as it was their responsibility as a director. Therefore,
Ang have fallen below the degree of care, skill and diligence in the exercise of his
duties. Furthermore, referring to the first guideline of the Intermittent theory provided
above, Ang doesn't have to show he has a greater degree of skill than is reasonably
expected of him. However, Ang is not even showing he has a greater degree and in
fact he has a lesser degree where he had fallen below the standard that is required
of him therefore, he had breached his fiduciary duty under Section 174 of the
Companies Act 2006.
Next, one will have to determine whether Ang, the managing director of
Bubble Ltd had breached his fiduciary duty owed to the company under Section 175
of the Companies Act 2006 which is the duty to avoid conflicts of interest. Section
175(1) essentially provides that a director must avoid situations where he may have
an interest which may conflict directly or indirectly with the interests of the company
with particular application to the exploitation of property, information or opportunity
which Ang might have committed. In this essay one will first identify whether or not
Ang is a director. Next one will determine the potential breaches committed by Ang.
In dealing with the issue on whether or not Ang is a director, Section 250 of
the Companies Act 2006 provides that a director includes any person occupying
the position of director by whatever name called. On the facts, it is clearly stated that
he is a managing director of Bubble Ltd, thus it will be very probable that he will be
managing the company on a daily basis and making all day to day decision of the
company. Hence Ang will be considered as the executive director and therefore a
director under Section 250 of the 2006 Act.
As Ang is a director of Bubble Ltd, he therefore owes fiduciary duties to the
company as per the case of Percival v Wright, which includes shareholders which
can be seen in the case of Greenhalgh v Ardene Cinemas. The duties are set out
and codified in Section 171 to Section 177 of the Companies Act 2006 and it is
provided under Section 170(4) of the same Act that relevant case laws are still
applicable to interpret the aforementioned provisions.
As the issue on whether or not Ang is a director is dealt with, now it is
required to determine whether or not Ang had breached his fiduciary duty to exercise
skill, care and diligence provided under Section 174 of the Companies Act 2006.
Section 174 is the statutory codification of the common law standard of care
expected of directors and this duty was originally introduced by way of intermittent
theory by Sterling J in the Marquis of Bute's case which was further extended by
Romer LJ in Re City Equitable Fire Insurance Co Ltd where the first guideline
states that a director need not exhibit in the performance of his duties a greater
, degree skill than may reasonably be expected of him. Currently, in order to
determine whether a director is in breach of his duty in exercising care, skill and
diligence, a higher standard have been imposed under Section 174(2) of the
Companies Act 2006 where 174(2)(a) is measured against the conduct expected of
a reasonably diligent person carrying out that director's function.
In the current case, a reasonably diligent director would have immediately act
upon by telling the management team or the other director of the company about this
opportunity regarding the expansion of business once they were approached by
other companies. They would have taken action to conduct a meeting to decide
about this matter as it is an opportunity for the company to become more successful,
they would not have acted in the same way as Ang by delaying it and subsequently
forgot about this opportunity as it was their responsibility as a director. Therefore,
Ang have fallen below the degree of care, skill and diligence in the exercise of his
duties. Furthermore, referring to the first guideline of the Intermittent theory provided
above, Ang doesn't have to show he has a greater degree of skill than is reasonably
expected of him. However, Ang is not even showing he has a greater degree and in
fact he has a lesser degree where he had fallen below the standard that is required
of him therefore, he had breached his fiduciary duty under Section 174 of the
Companies Act 2006.
Next, one will have to determine whether Ang, the managing director of
Bubble Ltd had breached his fiduciary duty owed to the company under Section 175
of the Companies Act 2006 which is the duty to avoid conflicts of interest. Section
175(1) essentially provides that a director must avoid situations where he may have
an interest which may conflict directly or indirectly with the interests of the company
with particular application to the exploitation of property, information or opportunity
