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Business and Corporate Law St Ronans Ales Ltd

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ns 171-188 of the Companies Act 2006 expands the duty even further requiring that directors act in a manner calculated to promote the company’s success and to take account of the effect that their decisions have on all stakeholders including the community and the environment.4The company directors’ decision to borrow 100,000 pounds against the assets of the company is negligent and a breach of the directors’ statutory duties pursuant to Sections 171-188 of the Companies Act 2006. It is a firmly established tenet of company law that directors in the course of exercising their duties are held to a specific standard. The standard is compared to the care and conduct that would generally be anticipated of a business man with the relevant skills and training.5 Taking this approach, it is inconceivable that a business man running a business with a 1 million pound turnover and net assets of 100,000 pounds would borrow money against the entire net worth of the business. In the event the company fails to repay the loan all of the company’s assets will be depleted.The directors’ duties have already been the subject of codification under the Companies Act 1985. The 1985 imposes upon the director the duty to safeguard the interest of the companies’ members.6 By taking out a loan which is secured by the company’s entire net worth the directors have exposed the company to the risk of foreclosure to the detriment of each of its members. Although each of the shareholders approved the load, only two of them are active directors. It therefore follows that the other members trusted Ian and James, the two active directors and went along with them as a result of that trust. Despite the misplaced judgment, each of the directors are equally responsible to all of the members of the company, including their employees. They each have a duty to act with reasonable care, skill and diligence.7The duty includes an obligation to exercise independent judgment and to