There it was held that a director might only exercise

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There, it was held that, a director might only exercise such knowledge as may be expected of a person of his knowledge and experience; that he is not bound to give continuous attention to the affairs of the company; and that he may delegate his duties to other directors and officers of the company. Download free eBooks at bookboon.com
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BUSINESS ORGANISATIONS AND AGENCY 443 COMPANY DIRECTORS Now however, the standard of care is stricter, with the test being both objective and subjective . Under s. 174 CA 2006, directors must act: With the care, skill, and diligence that would be exercised by a reasonably diligent person with the knowledge and skill and experience of any person in the same position (objective test); and with • The general knowledge, skill, and experienced possessed by that particular director (subjective test). This dual test is the same used to determine whether a director is guilty of wrongful trading under s 214 of the Insolvency Act 1986 and applied in Norman v. Theodore Goddard [1992] BCLC 14 . The decision in Re City Equitable Fire Insurance that, a director does not need to devote his full time to the affairs of the company now applies only to non-executive directors employed on a part-time basis. Executive directors who have full time service contracts are required to devote their full time to the service of their companies. Even non-executive directors have a duty to attend board meetings whenever they can because continuous absenteeism, without permission, for more than six months is a ground for dismissal. However, even though directors may delegate their duties to co-directors where appropriate, they now have a responsibility to supervise and monitor the discharge of those duties and keep themselves informed of their companies’ businesses. The right to delegate is not a permission to abdicate responsibility. In Equitable Life Assurance Society v. Bowley (2003) EWHC 2263 (Comm) , it was held that a non-executive director was not entitled to delegate his responsibilities if it meant an unquestioning dependence on others to do his job. Similarly, in Re Barings Plc, Secretary of State for Trade and Industry v Baker (No. 5) [1999] 1 BCLC 433, it was held that the exercise of the power of delegation does not absolve a director from the duty to supervise the discharge of those functions. It was also held that directors collectively have 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. Download free eBooks at bookboon.com
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BUSINESS ORGANISATIONS AND AGENCY COMPANY DIRECTORS 444 A direct application of the rule on care and skill could be seen in Dorchester Finance Co. v. Stebbing [1989] BCLC 498: Two non-executive directors of a finance company were in the habit of signing blank cheques for the use of their co-director. One of these non-executive directors was a chartered accountant while the other had extensive experience in accounting. The result
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