It is easier for shareholders to claim against directors for negligence and breach of directors’ duties.

The Companies Act extends shareholders’ current rights to sue directors for wrongs done to the company. From October 2007,  shareholders have been able to sue directors for negligence even where the director concerned has not benefited from his negligence.

They will, however, need the court’s permission to do so, and the courts have the power to speedily dismiss unmeritorious claims.

Changes in the law affecting directors’ liability

Companies may, going forward, bring more claims against their directors. The Companies Act 2006 has set out directors’ duties to the company. A director must act in a way which he considers, in good faith, would be most likely to promote the success of the company. In doing so, he must have regard to the following:

• the likely long term consequences of any decision
• the interests of employees
• the need to foster relationships with suppliers, customers and others
• the impact of the company’s operations on the community and environment
• the desirability of the company maintaining a reputation for high standards of business conduct

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