Company law Reform Bill Essay Example | Topics and Well Written Essays - 2500 words

Company law Reform Bill - Essay Example These directors together are called the Board of Directors. Since all the directors cannot execute individually they elect one among them as a Managing Director. The board of Directors will take all policy decisions in the Board meeting and the Managing Director executes the decision taken by the board. The proviso 741(1) deals with the definition of directors, this proviso is an inclusive provision which says the directors include properly appointed directors, "de jure" directors like "governor", not properly appointed directors such as "de facto directors" and "shadow" directors. [Charlesworth & Morse, Company Law (1999)] a De facto Directors: De facto Directors are those who act openly as directors and they claim to be directors on they being performed the functions of the directors, though they are not properly appointed. These directors are recognized as de facto directors for only that period during which they acted so. [Charlesworth & Morse, Company Law(1999)] b It is a decided law that person who claims to be director by de facto has to make a plea and establish that he has undertaken such function of the company which would have been undertaken by the director only, but not simply to show that he has under taken the and discharged the functions which the management below the directors could not be under taken and discharged. Re Richborough Furniture Ltd 2 In this case it was held that De facto director should satisfy either of two tests such as (a) he is sole person directing the affairs of the company or (b) he was acting on par with other directors in directing the affairs of the company, if there are other properly appointed directors. Secretary of State for Trade and Industry v. Lating 3 In this case while approving the two tests it was held that by simply satisfying either of the two test is not sufficient to claim as de fact director, but he should be still acting as such, which means that the de facto director is recognized as director only during the period in which he is acting as per the two tests. Once he ceased to be acting as such he would be ceasing to be de facto director. The court in another case Secretary of State for Trade and Industry v. Hickling 4 approved this Shadow Directors: Section 741(2) of the companies act 1985 defines shadow director as 'a person in accordance with whose directions or instructions the directors of a company are accustomed to act'. Professional persons on whose, advise the directors act are excluded from this definition. Shadow directors are vicariously liable for the action of the directors whom they appoint or control. This provision aims at preventing the persons escaping from the liability under the shelter of a board of marionette. The directors of a subsidiary who are working under the directions of the directors of the parent company then the directors of the parent company are called the shadow directors. (LS Sealy, Cases and Materials in Company Law) c Re Hydrodam(Corby)ltd 1 The court held in this case that one has to satisfy the four conditions for adjudicating a person as shadow director such as (i) he is properly appointed or de facto director (ii) the director directs the other directors in which manner they have to function in relation to the company (iii) the other directo