Directors' duties in takeover bids and English company law

Mukwiri, Jonathan (2008) Directors' duties in takeover bids and English company law. International Company and Commercial Law Review, 19 (9). pp. 281-289. ISSN 0958-5214

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This article deals with the question of how directors' duties, as currently understood in English company law, are affected by the relevant provisions of EC Directive 2004/25 (the Directive), as implemented in the United Kingdom by the Companies Act 2006 (the CA). Directors' duties have traditionally been provided under common law, now codified under Pt 10 of the CA 2006. The “codified” duties are based on certain common law rules and equitable principles as they apply in relation to directors and have effect in place of those rules and principles as regards the duties owed to a company by a director. Section 170(4) of the CA 2006 requires these duties to be interpreted and applied in the same way as common law rules or equitable principles, and that regard must be had to the corresponding common law rules and equitable principles in interpreting and applying the codified general duties. As such, it is still the law that fiduciary duties are owed to the company, and only owed to shareholders if a special factual relationship between the directors and the shareholders is established in a particular case. The analysis in this article seeks to highlight such special factual relationships in takeovers. A close evaluation of the general duties reveals that these corporate law duties do not sit properly with specific duties under takeover rules contained in the City Code on Mergers and Takeovers (the Code). This article argues that in codifying directors' duties and at the same time making rules implementing the Directive (rules contained in the Code), the CA 2006 creates a legal presumption that directors owe their duties to shareholders and other parties interested in takeover activities for which the company is involved. This article examines the complexity created by this dual codification of directors' duties and the Code, and suggests that directors' duties during takeovers should be treated as sui generis in order to align the Code with English company law.

Item Type: Article
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Depositing User: ULCC Admin
Date Deposited: 31 May 2012 19:32
Last Modified: 11 Dec 2017 19:20

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