DOCSLIB.ORG

Powers, Duties and Liabilities of Company Directors: a Comparative Study of the Law and Practice in the UK and Saudi Arabia

Total Page：16

File Type：pdf, Size：1020Kb

Download full-text PDF Read full-text
Powers, Duties and Liabilities of Company Directors: a Comparative Study of the Law and Practice in the UK and Saudi Arabia Faculty of Arts and Social Sciences The Law School Powers, duties and liabilities of company directors: A comparative study of the law and practice in the UK and Saudi Arabia Abdullah Nasser Aldahmash (November 2020) A thesis submitted for the Degree of Doctor of Philosophy Abstract Abstract Due to the globalisation of business and the concept of borderless business activities, these new phenomena need business management to be open and adopt and practice management’ skills with the international in mind, and give good consideration to the circumstances of the internationalisation of the business through directors having powers as provided under contract and law. The financial crises in previous years have demonstrated the importance of directors’ duties to manage the company's affairs properly; these crises were a result of many cases of fraud and mismanagement. The directors’ duties in the UK and the KSA have been codified to enhance the clarity of the law and make it easier for the responsibilities of directors towards the company and others to be understood. It also aims to prevent fraud and mismanagement that causes corporate collapse. This study investigates and analyses the powers, duties and liabilities of the directors in Saudi Arabia and the UK in order to demonstrate the extent to which these regulation work effectively. This is by a critical evaluation of relevant legislation and case law on the subject matter of the study and demonstrating practical problems, which may result from some legislation. By doing this, the study provides an accurate picture of the directors' powers, duties and liabilities, and provides solutions to practical problems of legislation in the same context. 2 Declaration Declaration I confirm that this thesis submitted is my own work. It has not been submitted in the same form for another degree elsewhere. All quotations have been recognised and the sources of identification have been acknowledged. 3 Acknowledgement Acknowledgement All praise be to Allah (the God) first and foremost. Then I would like to take this opportunity to express my sincere gratitude and thanks to both of my supervisors, Prof. David Milman and Mr. Philip Lawton for their continued guidance and constant help to overcome obstacles during my PhD research. I must express my thanks and gratitude to the Government of the Kingdom of Saudi Arabia for giving me this opportunity to study a PhD degree in the United Kingdom. Finally, I must thank my parents, who prayed for me and supported me as best they could during my PhD journey. Table of Contents Table of Contents Abstract ............................................................................................................. 2 Declaration ........................................................................................................ 3 Acknowledgement ............................................................................................ 4 Table of Contents ............................................................................................. 5 Chapter One: Introduction ................................................................................ 9 1.1 Preamble ......................................................................................................................... 9 1.2 The significance of this study ........................................................................................ 13 1.3 The aims and objectives of this study ........................................................................... 15 1.4 Research questions ....................................................................................................... 16 1.5 Methodology ................................................................................................................. 16 1.6 Legal transplantation ..................................................................................................... 18 Chapter Two: Legal principles with respect to company directors and board of directors .......................................................................................................... 24 2.1 Legal principles with respect to company directors ...................................................... 24 2.1.1 Who is a director? ...................................................................................................... 24 2.1.2 Appointment of directors ........................................................................................... 29 2.1.3 Removal of directors .................................................................................................. 34 2.1.4 Directors’ disqualification ........................................................................................... 38 2.2 Legal principles with respect to the board of directors ................................................. 41 2.2.1 Board structure .......................................................................................................... 41 2.2.2 Directors’ meeting and decision-making .................................................................... 47 Chapter Three: The powers and duties of company directors in UK law ........ 50 3.1 Introduction ................................................................................................................... 50 3.2 The directors’ powers .................................................................................................... 51 3.3 The directors’ duties ...................................................................................................... 53 3.3.1 Duty to act within powers .......................................................................................... 53 3.3.2 Duty to promote the success of the company ........................................................... 60 3.3.3 Duty to exercise independent judgment .................................................................... 79 3.3.4 Duty to exercise reasonable care, skills, and diligence .............................................. 87 3.3.5 Duty to avoid conflicts of interest and to declare the interest in a proposed transaction or arrangement ................................................................................................ 91 3.3.6 Duty not to accept benefits from third parties .......................................................... 94 Chapter Four: The powers and duties of company directors in Saudi Arabian law and Islamic law ......................................................................................... 98 5 Table of Contents 4.1 Introduction ................................................................................................................... 98 4.2 Duty to act within powers to achieve the purposes of the company ................. 101 4.3 Duty to exercise reasonable care .......................................................................... 104 4.4 Duty to maintain confidentiality .............................................................................. 106 4.5 Duty to avoid conflicts of interest and to declare any personal interest ........... 109 4.6 Duty not to participate in any business competitive with that of the company. ........................................................................................................................................... 111 4.7 Duty not to accept benefits from third parties ...................................................... 115 4.8 Duty to act in the interests of the company and consider the interests of the stakeholders. ................................................................................................................... 117 4.9 Duty to be a liquidator upon the dissolution of the company ............................. 118 4.10 The evaluation of the Saudi Arabian law with respect to the directors’ duties. ........................................................................................................................................... 123 4.11 The comparison of directors’ duties in the UK and Saudi legislation. ....................... 125 Chapter Five: The liability of company directors in UK law ........................... 129 5.1 Business Judgment Rule and Judicial Intervention ...................................................... 129 5.2 Directors’ liability ........................................................................................................ 136 5.2.1 Breach of fiduciary duty ........................................................................................... 136 5.2.2 Breach of duty owed to creditors ............................................................................. 140 5.2.2.1 Wrongful Trading ................................................................................................... 140 5.2.2.2 Fraudulent trading ................................................................................................. 148 5.2.3 Liability for negligence to the company and third party .......................................... 152 5.3 The consequences of breach of the duties .................................................................. 155 5.3.1 Return of property and Account of profits ............................................................... 155 5.3.2 Equitable compensation ........................................................................................... 157 5.3.3 Rescission of a transaction ....................................................................................... 158
Load more

Recommended publications
  • Understanding Maryland's Business Judgment Rule
    File: sharfmanfinalmacro.doc Created on: 4/18/2006 5:07 PM Last Printed: 5/20/2006 5:17 PM Understanding Maryland’s Business Judgment Rule Bernard S. Sharfman1 I. INTRODUCTION The “Business Judgment Rule” (“BJR”) is a common law stan- dard of judicial review.2 The BJR is applied by the courts to favor the actions of corporate managers.3 According to Henry Manne, a leading commentator on corporate law, the BJR protects from ju- dicial review “honest if inept business decisions” made by corpo- rate managers.4 By accomplishing this strategic objective, the BJR tries to obtain its ultimate goal - preventing courts from exer- cising regulatory authority over corporate management.5 The creation of the BJR as a means of obtaining this goal is a direct product of the time period in which it originated. The BJR first appeared in the 19th century, a time when there was a fear of gov- ernment regulation. Since then, the BJR has been used by the courts as a means to avoid the exercise of regulatory authority over corporations.6 1. Bernard Sharfman is a member of the DC and Maryland bars and a Class of 2000 graduate of Georgetown University Law Center. This article is dedicated to Mr. Sharfman’s wife, Susan David, for without her encouragement and editorial comments this article would never have been completed. Mr. Sharfman would like to thank Joseph Hinsey, H. Douglas Weaver Professor of Business Law, Emeritus, at the Harvard University Graduate School of Business Administration and James J. Hanks, Jr., Partner, Venable LLP and the author of Maryland Corporate Law for their helpful comments and insights.
    [Show full text]
  • Monitoring the Duty to Monitor
    Corporate Governance WWW. NYLJ.COM MONDAY, NOVEMBER 28, 2011 Monitoring the Duty to Monitor statements. As a result, the stock prices of Chinese by an actual intent to do harm” or an “intentional BY LOUIS J. BEVILACQUA listed companies have collapsed. Do directors dereliction of duty, [and] a conscious disregard have a duty to monitor and react to trends that for one’s responsibilities.”9 Examples of conduct HE SIGNIFICANT LOSSES suffered by inves- raise obvious concerns that are industry “red amounting to bad faith include “where the fidu- tors during the recent financial crisis have flags,” but not specific to the individual company? ciary intentionally acts with a purpose other than again left many shareholders clamoring to T And if so, what is the appropriate penalty for the that of advancing the best interests of the corpo- find someone responsible. Where were the direc- board’s failure to act? “Sine poena nulla lex.” (“No ration, where the fiduciary acts with the intent tors who were supposed to be watching over the law without punishment.”).3 to violate applicable positive law, or where the company? What did they know? What should they fiduciary intentionally fails to act in the face of have known? Fiduciary Duties Generally a known duty to act, demonstrating a conscious Obviously, directors should not be liable for The duty to monitor arose out of the general disregard for his duties.”10 losses resulting from changes in general economic fiduciary duties of directors. Under Delaware law, Absent a conflict of interest, claims of breaches conditions, but what about the boards of mort- directors have fiduciary duties to the corporation of duty of care by a board are subject to the judicial gage companies and financial institutions that and its stockholders that include the duty of care review standard known as the “business judgment had a business model tied to market risk.
    [Show full text]
  • 22 Vertiefungstext 13.Mdi
    TBS 16 The Appeal of Sami Yusuf and the Search for Islamic Authenticity by Christi... Page 1 of 13 PEER REVIEWED ARTICLE: The Appeal of Sami Yusuf and the Search for Islamic Authenticity By Christian Pond A quick glance at the top 40 most requested songs on the Web site for the popular Arabic music video channel Melody Hits TV reveals the latest and greatest from stars such as Lebanon’s Nancy Ajram—infamous for her sexually suggestive videos—as well as others like America’s rapper Eminem and Egypt’s crooner Tamer Hosny. Next to each song’s title and number is also displayed a picture of the artist. At number 32, next to her hit Megamix, is a picture of Britney Spears staring at the viewer with the fingers of her right hand resting suggestively on her bottom lip. At number 35, popular rapper 50 Cent is shown in front of an expensive sports car wearing a fur coat, diamond-studded chain and black bandana. Wedged between the two at number 34 is the British Muslim singing phenomenon Sami Yusuf with his latest hit Hasbi Rabbi.(1) Well-dressed, sporting a fashionably cut, close-cropped beard and preferring tailored black suits to traditional dress, he is famous for his glitzy religious CDs and music videos. Born in 1980 to Azerbaijani parents, Sami Yusuf grew up in London and first studied music under his father, a composer. From a young age he learned to play various instruments and at the age of 18 was granted a scholarship to study at the Royal Academy of Music in London.(2) In 2003, Yusuf released his first album entitled Al Mu’allim (The Teacher).
    [Show full text]
  • TVEE LINKER Arabic Channels
    lebanon united Arabic Egypt Dubai Tele Liban Rotana Classic Misr 25 Modem Sport MTV Lebanon Rotana masriya ON TV Abu dhabi LBC Rotana_aflam Alkaherawalnas 2 Al Watan OTV Rotana_cinema Blue Nile Sama Dubai nbn Rotana_music Nile Dubai MTV TV panorama_action Nile Sport Dubai HD Al jadeed panorama_comedy Nile Cinema Dubai Sports Al jadeed live fx_arabia Nile Comedy Noor Dubai Future TV infinity Nile News Dubai one Al mayadeen Iraq Nile Family Dubai Sport 1 Al Manar Dream_1 Nile Life National Geographic Abudhabi Asia News Lebanon Al sharqiya Drama CBC tv Scope TV Charity TV Al sharqiya Music Cairo Cinema Abu Dhabi Sports 1 Noursat Al Shabab Al sharqiya News Cima Sharjah Nour sat Lebanon Al Sharqiya CBC +2 abu dhabi drama Syria Al sharqia drama CBC Drama Mbc Action ANN Sharqia CBC Egypt Mbc Syria Drama Beladi Citurss TV Mbc 2 Syria Al Babeleyia Masrawi Aflam Rotana Khalijia Orient TV 2 Al Fayhaa Al Qahira Al Youm Live Rotana Cinema Al Tarbaweiyah Al Soriyah Ishtar Moga Comedy Rotana Music Nour El Sham AI Iraqiya Cnbc Arabia Dubai Sport 3 Halab TV Al Sumaria Aljayat Series Saudi Arabic Qatar Al kout Miracle TV Al Thakafiyah Aljazeera Al Forat SAT7 Kids Al Ekhbariya TV Live Aljazeera Sports+1 Al hurra_iraq Sat7 Arabic TV Egypt Al Ekhbariya Aljazeera Sports+3 Sharqia News TRT Arabic Al Eqtisadiyah Aljazeera Sports+9 Al Rasheed TV Al Karma KTV3 plus Aljazeera Sports+8 Hanibal Al Malakot Al Sabah Aljazeera Sports+10 Al Baghdadia Al Kawri Alkass KSA Riyadiah Aljazeera sports x Baghdad Al Ahly Club KSA 1 Aljazeera sports3 Iraq Afaq Alalamia KSA 2
    [Show full text]
  • Methods and Methodologies in Fiqh and Islamic Economics
    Methods and Methodologies in Fiqh and Islamic Economics Dr. Muhammad Yusuf Saleem Department of Economics Kulliyyah of Economics and Management Sciences International Islamic University Malaysia [email protected]; [email protected] Abstract. This paper intends to examine the methods of reasoning that are employed in Fiqh and critically discuss their adoption in Islamic economics. The paper argues that the methods used in Fiqh are mainly designed to find out whether or not a certain act is permissible or prohibited. Islamic economics, on the other hand, is a social science. Like any other social science its proper unit of analysis is the society itself. Methodologies of Fiqh and Islamic economics also differ as the former focuses on prescriptions. It prescribes what an individual should do or avoid. In contrast, Islamic economics is more concerned with describing economic phenomena. While Fiqh, especially worship (Ibadat) type, prescriptions are permanent in nature and for all individuals, economic descriptions may change from time to time and from society to another. This paper argues that the methods of reasoning for discovering the truth in fiqh and Islamic economics are not necessarily identical. While fiqh has a well developed methodology in the form of usul al-fiqh, Islamic economics in its search for finding the truth should rely on a methodology that suits its social and descriptive nature. Introduction This paper begins with a discussion on methods and methodologies. It explains how the adoption of different standards for the acceptability of certain evidence can lead to differences in approaches and methodologies. It also discusses that various disciplines have different units of analysis or objects of inquiries.
    [Show full text]
  • Judgment Rule Lindsay C
    This article appeared in the Spring 2013 issue of Commercial & Business Litigation, Vol. 14 No. 3. ©2013 American Bar Association, 321 N Clark St, Chicago, Illinois 60654; (312) 988-5607. All rights reserved. Breaking Down the Business- Judgment Rule Lindsay C. Llewellyn In the wake of corporate bankruptcies, government bailouts, and shareholder losses resulting from the economic downturn of 2008, shareholders are increasingly turning to derivative suits in an effort to hold someone responsible for their financial losses. Corporate directors stand in a fiduciary relationship of trust and confidence with the corporation and its shareholders. As fiduciaries, corporate directors owe the corporation and its shareholders fiduciary duties of diligence and fidelity in performing their corporate duties. These fiduciary obligations include the duty of care and the duty of loyalty. “In essence, the duty of care consists of an obligation to act on an informed basis; the duty of loyalty requires the board and its directors to maintain, in good faith, the corporation’s and its shareholders’ best interests over anyone else’s interests.” Shoen v. SAC Holding Corp., 137 P.3d 1171, 1178 (Nev. 2006) (citing Cede & Co. v. Technicolor, Inc., 634 A.2d 345, 360-61 (Del. 1993)). In bringing shareholder derivative suits, shareholders seek to impose liability on corporate directors for failing to carry out their corporate duties in accordance with this standard of care. An important and powerful defense to such derivative suits lies in the common law “business- judgment rule.” What Is a Shareholder Derivative Suit? A shareholder derivative action is not a cause of action in and of itself, such as breach of contract or breach of fiduciary duty.
    [Show full text]
  • Ar Risalah) Among the Moroccan Diaspora
    . Volume 9, Issue 1 May 2012 Connecting Islam and film culture: The reception of The Message (Ar Risalah) among the Moroccan diaspora Kevin Smets University of Antwerp, Belgium. Summary This article reviews the complex relationship between religion and film-viewing among the Moroccan diaspora in Antwerp (Belgium), an ethnically and linguistically diverse group that is largely Muslim. A media ethnographic study of film culture, including in-depth interviews, a group interview and elaborate fieldwork, indicates that film preferences and consumption vary greatly along socio-demographic and linguistic lines. One particular religious film, however, holds a cult status, Ar Risalah (The Message), a 1976 historical epic produced by Mustapha Akkad that deals with the life of the Prophet Muhammad. The film’s local distribution is discussed, as well as its reception among the Moroccan diaspora. By identifying three positions towards Islam, different modes of reception were found, ranging from a distant and objective to a transparent and subjective mode. It was found that the film supports inter-generational religious instruction, in the context of families and mosques. Moreover, a specific inspirational message is drawn from the film by those who are in search of a well-defined space for Islam in their own lives. Key words: Film and diaspora, media ethnography, Moroccan diaspora, Islam, Ar Risalah, The Message, Mustapha Akkad, religion and media Introduction The media use of diasporic communities has received significant attention from a variety of scholarly fields, uncovering the complex roles that transnational media play in the construction of diasporic connectedness (both ‘internal’ among diasporic communities as well as with countries of origin, whether or not ‘imagined’), the negotiation of identity and the enunciation of socio-cultural belongings.
    [Show full text]
  • Robert T. Miller
    Robert T. Miller Professor of Law Fellow and Program Affiliated Scholar F. Arnold Daum Fellow in Corporate Law Classical Liberal Institute University of Iowa College of Law New York University School of Law Address: 492 Boyd Law Building Address: 40 Washington Square South University of Iowa New York, NY 10012 Iowa City, IA 52242 Phone: (319) 335-9001 Phone: (319) 335-9001 Fax: (319) 335-9098 Fax: (319) 335-9098 Email: [email protected] Email: [email protected] Web: http://law.uiowa.edu/robert-t-miller Web: http://www.classicalliberalinstitute.org/ SSRN: http://ssrn.com/author=518229 Courses Taught: Business Associations Antitrust Securities Regulation Mergers & Acquisitions Contracts Legal Capstone Course Law & Economics Deals Corporate Finance Capitalism Academic and Professional Experience: Professor of Law and F. Arnold Daum Fellow of Corporate Law, University of Iowa College of Law, 2012 to present. Committees and Service to the Law School: Co-Chair, Status and Reputation Committee (2021-present) Chair, Promotion and Tenure Committee (2012-2015, 2017-2021; co-chair 2016-2017; member, 2018- present) Chair, Curriculum Committee (Spring 2017; member, 2016-2021) Chair, LAWR (Legal Writing) Promotion and Reappointment Committee (2019-2020) Chair, Instructional Faculty Promotion and Reappointment Committee (2019-present) Member, Enrollment Management Committee for Three-Year JD Applicants (2016-2017) Chair, Faculty Appointments Committee/Entry Level (2015-2016) Member, Faculty Appointments Committee (2014-2015, 2020-2021) Chair,
    [Show full text]
  • Constraints on Pursuing Corporate Opportunities
    Canada-United States Law Journal Volume 13 Issue Article 10 January 1988 Constraints on Pursuing Corporate Opportunities Stanley M. Beck Follow this and additional works at: https://scholarlycommons.law.case.edu/cuslj Part of the Transnational Law Commons Recommended Citation Stanley M. Beck, Constraints on Pursuing Corporate Opportunities, 13 Can.-U.S. L.J. 143 (1988) Available at: https://scholarlycommons.law.case.edu/cuslj/vol13/iss/10 This Article is brought to you for free and open access by the Student Journals at Case Western Reserve University School of Law Scholarly Commons. It has been accepted for inclusion in Canada-United States Law Journal by an authorized administrator of Case Western Reserve University School of Law Scholarly Commons. Constraints on Pursuing Corporate Opportunities Stanley M. Beck* The question of corporate opportunity is one of the most difficult and, at the same time, one of the most interesting with respect to fiduciary duties. The Anglo-Canadian courts, and to an extent the American courts, have had a difficult time establishing any clear guidelines. The Canadian courts have taken a strict fiduciary approach. For example, the law of trusts for children has been applied in corporate opportunity cases, and such "simple" cases as Keech v. Sandford I (from 1726) and the later case of Parker v. McKenna2 (from 1874) have been repeatedly cited by courts considering this issue. The language of Lord Justice James in Parkerv. McKenna was that the court was not entitled to receive any evidence as to whether the prin- cipal did or did not suffer an injury, for the "safety of mankind requires that no agent shall be able to put his principal to the danger"3 of such an inquiry.
    [Show full text]
  • Islamic Relief Charity / Extremism / Terror
    Islamic Relief Charity / Extremism / Terror meforum.org Contents Executive Summary ................................................................................................................ 1 Introduction ������������������������������������������������������������������������������������������������������������������������� 3 From Birmingham to Cairo �������������������������������������������������������������������������������������������������� 4 Origins ����������������������������������������������������������������������������������������������������������������������������������� 7 Branches and Officials ����������������������������������������������������������������������������������������������������������� 9 Government Support ������������������������������������������������������������������������������������������������������������ 17 Terror Finance ��������������������������������������������������������������������������������������������������������������������� 20 Hate Speech ������������������������������������������������������������������������������������������������������������������������� 25 Charity, Extremism & Terror ���������������������������������������������������������������������������������������������� 29 What Now? �������������������������������������������������������������������������������������������������������������������������� 32 Executive Summary What is Islamic Relief? Islamic Relief is one of the largest Islamic charities in the world. Founded in 1984, Islamic Relief today maintains
    [Show full text]
  • The Business Judgment Rule
    Valparaiso University Law Review Volume 36 Number 3 Summer 2002 pp.631-654 Summer 2002 The Rule That Isn't a Rule - The Business Judgment Rule Douglas M. Branson Follow this and additional works at: https://scholar.valpo.edu/vulr Part of the Law Commons Recommended Citation Douglas M. Branson, The Rule That Isn't a Rule - The Business Judgment Rule, 36 Val. U. L. Rev. 631 (2002). Available at: https://scholar.valpo.edu/vulr/vol36/iss3/3 This Lecture is brought to you for free and open access by the Valparaiso University Law School at ValpoScholar. It has been accepted for inclusion in Valparaiso University Law Review by an authorized administrator of ValpoScholar. For more information, please contact a ValpoScholar staff member at [email protected]. Branson: The Rule That Isn't a Rule - The Business Judgment Rule The Indiana Supreme Court Lecture: THE RULE THAT ISN'T A RULE - THE BUSINESS JUDGMENT RULE Douglas M. Branson* I. INTRODUCTION The much misunderstood business judgment rule is not a "rule" at all. It has no mandatory content. It involves no substantive "do' s" or "don' ts" for corporate directors or officers. Instead, it is a standard of judicial review, entailing only slight review of business decisions. Alternatively, it could be called a standard of non-review, entailing no review of the merits of a business decision corporate officials have made.' Various commentators' comments to the contrary, mostly based upon one celebrated (or lamented) Delaware decision,2 strictly speaking, the standard of care applicable to corporate directors remains due care. As the Model Business Corporation Act and the Indiana statute phrase it, a director is to discharge her duties "with the care an ordinarily reasonably prudent person in a like position would exercise under similar circumstances." 3 The standard of conduct is not "slight care," or "gross negligence," or anything other than due care.4 'W.
    [Show full text]
  • Corporate Governance in Islamic Financial Institutions Emily Samra
    University of Chicago Law School Chicago Unbound International Immersion Program Papers Student Papers 2016 Corporate Governance in Islamic Financial Institutions Emily Samra Follow this and additional works at: http://chicagounbound.uchicago.edu/ international_immersion_program_papers Part of the Law Commons Recommended Citation Emily Samra, "Corporate governance in Islamic financial institutions," Law School International Immersion Program Papers, No. 22 (2016). This Working Paper is brought to you for free and open access by the Student Papers at Chicago Unbound. It has been accepted for inclusion in International Immersion Program Papers by an authorized administrator of Chicago Unbound. For more information, please contact [email protected]. Corporate Governance in Islamic Financial Institutions Emily Samra J.D. Candidate, Class of 2017 INTRODUCTION Corporate governance has been at the forefront of discussions of the financial services industry for decades. Major failures in the business world, from Enron to Lehman Brothers, have been characterized as, among other things, failures of corporate governance. As a result, in order for a financial institution to compete on a global scale investors, regulators, and consumers must have faith that the solid corporate governance principles are embedded in the institutions core. The Islamic finance industry, which “had worked effectively for centuries during the heyday of the Muslim civilization,”1 has made resurgence on the global stage. As Islamic financial institutions (IFIs) expand
    [Show full text]