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A Joint Consultation Paper

SCOTTISH LAW COMMISSION




(Discussion Paper No 105)




Law Commission




(Consultation Paper No 153)




Company Directors: Regulating Conflicts of Interests and Formulating a Statement of Duties


 
The Law Commission and the Scottish Law Commission were set up by the Law Commissions Act 1965 for the purpose of promoting the reform of the law.

The Law Commissioners are:

The Honourable Mrs Justice Arden DBE, Chairman
Professor Andrew Burrows
Miss Diana Faber
Mr Charles Harpum
Mr Stephen Silber, QC


The Secretary of the Law Commission is Mr Michael Sayers and its offices are at Conquest House, 37-38 John Street, Theobalds Road, London WC1N 2BQ.

The Scottish Law Commissioners are:

The Honourable Lord Gill, Chairman
Dr E M Clive
Mr P S Hodge, QC
Professor K G C Reid
Mr N R Whitty


The Secretary of the Scottish Law Commission is Mr J G S Maclean and its offices are at 140 Causewayside, Edinburgh EH9 1PR.

This joint consultation paper, completed on 24 August 1998, is circulated for comment and criticism only. It does not represent the final views of the two Law Commissions.

Executive Summary

1. This project falls into two parts. The first part is a review of Part X of the Companies Act 1985. This regulates self-dealing by directors and contains provisions as to what information concerning transactions in which directors are interested should be disclosed, and to whom, what the role of shareholders should be, and when such transactions are prohibited.
2. There are many transactions entered by a company in which directors (or persons connected with them) have an interest. The provisions in Part X are diverse and complex, and they lack overall coherence and consistency. Moreover, since they were enacted, there have been important developments in corporate governance. What this consultation paper aims to do is to obtain a wide range of views on the ways in which these complex and important statutory rules can be modernised and rationalised.
3. The second half of the project considers the case for having a statutory statement of the duties of directors to their company. This would include fiduciary duties and the duty of care. This issue has been considered before but it is time to look at it again. There have been many calls to make the law in this area more accessible and transparent. This consultation paper puts forward a range of possibilities for making directors' duties under the general law more widely understood.
4. Appendix A contains a draft statement of the duties of directors under the general law. It also contains a draft clause setting out a possible new statutory duty of care in line with recent developments in the general law.
5. This project aims to contribute to the DTI's recently announced review of company law.
6. This project contains an economic analysis of the law and proposes empirical research in the consultation period.
7. A summary of questions for consultees is set out in Part 18. The consultation period will end on 24 November 1998.


 
Acknowledgements

J E Parkinson, Corporate Power and Responsibility (1993) by permission of Oxford University Press.

The Kind Report on Corporate Governance (29 November 1994) reproduced with permission of the Institute of Directors in South Africa.

Principles of Corporate Governance ^...1994 by The American Law Institute. Reprinted with permission. All rights reserved.

Edward S Herman, Corporate Control, Corporate Power (1981) by permission of Cambridge University Press.

The Companies Act 1993, New Zealand ^...The Crown. Reproduced with permission of the Crown.

Review of the Hong Kong Companies Ordinance - Consultancy Report (March 1997) reproduced with permission of The Government of the Hong Kong Special Administrative Region.

The Listing Rules, ^...London Stock Exchange Limited 1998. Reproduced with permission.

The Combined Code (1998). Reproduced with permission of the Publishers of the Combined Code, Gee Publishing Ltd, 100 Avenue Road, Swiss Cottage, London NW3 3PG.

Directors' Remuneration, Report of a Study Group chaired by Sir Richard Greenbury ("the Greenbury Report") (17 July 1995). Reproduced with permission of the Publishers of the Greenbury Report, Gee Publishing Ltd, 100 Avenue Road, Swiss Cottage, London NW3 3PG.

The Committee on Corporate Governance ("the Hampel Committee"), Final Report (January 1998). Reproduced with permission of the Publishers of the Final Report of the Hampel Committee, Gee Publishing Ltd, 100 Avenue Road, Swiss Cottage, London NW3 3PG.

Financial Reporting Standard and Financial Reporting Standards for Smaller Entities reproduced with permission of the Accounting Standards Board.

True and Fair Joint Options reproduced with permission of Mrs Justice Arden and the CCAB.

The Australian Corporations Law and the Corporate Law Economic Reform Bill 1998 (and Explanatory Memorandum) ^...Commonwealth of Australia. Reproduced with permission.

The Canada Business Corporation Act 1974-75-76, reproduced with permission of the Canadian Government.


 


Contents

	Paragraph
GLOSSARY OF ABBREVIATIONS	Glossary
PART 1:  INTRODUCTION
The DTI's review of company law	1.1
Terms of reference	1.2
Contents of this part	1.5
Reasons for this project	1.7
Legislative history of Part X	1.9
Methodology adopted in reviewing Part X	1.11
Central general questions	1.13
Approach to company law reform	1.14
Departmental review of company law 1991-98	1.16
(a)  DTI's consultative documents on the Companies Act 1985, Schedule 6 (October 1991)	1.17
(b)     DTI Working Party 1993-95 on directors' duties	1.18
(c)     The Law Commission's feasibility study on private companies (November 1994)	1.19
(d)     DTI's consultative document on disclosure of directors' shareholdings (August 1996)	1.20
Role of self-regulation in modern company law	1.21
The Stock Exchange's Listing Rules	1.24
The Stock Exchange's Model Code for transactions in securities by directors, certain employees and connected persons	1.26
The Rules of the Alternative Investment Market (AIM)	1.28
Cadbury Report	1.30
Greenbury Report	1.31
Hampel Report	1.32
The Stock Exchange's Combined Code of Corporate Governance	1.34
The City Code on Takeovers and Mergers	1.36
Legal consequences of a breach of the self-regulatory rules	1.38
Accounting Standards	1.45
Typology of companies	1.46
Regulation of directors	1.49
Duties of directors	1.49
Enforcement of directors' duties	1.50
Disqualification of company directors for unfitness	1.51
Part X and the law relating to directors' duties and its application to England, Wales and Scotland	1.52
Northern Ireland	1.53
European Community law	1.54
Matters outside this project	1.55
Structure of this consultation paper	1.56
Acknowledgements	1.58
PART 2:  GUIDING PRINCIPLES FOR REFORM
Introduction	2.1
Aims of company law reform	2.3
DTI's company law review	2.3
The Australian Corporations Law and Economic Reform Programme (CLERP)	2.6
Recent company law reform initiatives in Canada, New Zealand and Hong Kong	2.7
Canada	2.8
New Zealand	2.9
Hong Kong	2.11
Role of shareholders and directors in companies	2.12
Function of Part X and directors' duties	2.13
What are the general principles that should guide reform of the law in the area of Part X and directors' duties?	2.14
Law Commission Report on Shareholder Remedies	2.14
Guiding principles for directors' dealings and duties?	2.17
PART 3:  ECONOMIC CONSIDERATIONS
Introduction	3.1
The contribution of economic analysis	3.3
Company law and economic efficiency	3.10
Company law and agency costs	3.10
A typology of rules within company law	3.15
The fiduciary relationship	3.19
Efficient default rules:  Some general considerations	3.32
The fiduciary principle should in general operate as a penalty default rule	3.41
How onerous should the disclosure and/or ratification requirements be?	3.47
Analysis of the disclosure and ratification requirements under Part X of the Companies Act	3.51
Table	3.52
Rules governing disclosure and consent through approval, release and ratification under Part X of the Companies Act 1985	3.52
Absolute prohibitions:  Sections 323, 330	3.54
General principles governing disclosure	3.57
Disclosure to the board:  Sections 317 and 322B	3.58
Disclosure to shareholders:  Sections 314, 318, 324, 325 and 328	3.64
Approval and ratification by shareholders:  Sections 312, 315, 316, 319, 320, 322, 322A, and 337	3.66
General conclusions on Part X	3.71
Civil remedies for breach of fiduciary duty	3.73
The efficiency of criminal sanctions for breach of fiduciary duty	3.79
The duty of care	3.85
Conclusions	3.92
SECTION A:  PART X OF THE COMPANIES ACT 1985
PART 4:  SUBSTATIVE IMPROVEMENTS 1:  SECTIONS 312-323 OF THE COMPANIES ACT 1985
Introduction	4.1
Impact of the economic considerations discussed in Part 3	4.9
Impact of the general principles provisionally identified in Part 2	4.10
Sections 312-316:  Payment to director for loss of office, etc	4.11
General	4.11
The Jenkins Committee	4.13
The distinction between covenanted and uncovenanted payments and the Privy Council's decision in Taupo Totara Timber v Rowe	4.14
Later authorities	4.23
Is section 316(3) properly applied?	4.25
Role of self-regulation	4.28
(i)   Hampel Committee:  Pre-determined compensation clauses encouraged	4.28
(ii)   The Combined Code:  Role of remuneration committees explained	4.30
(iii)  The City Code	4.33
Overlap with section 320	4.35
Takeover offers and sections 314-315	4.36
Conflicting claims	4.39
Civil remedies	4.40
Options for reform and issues reviewed	4.42
Option 1:      No Change	4.43
Option 2:      Reverse the effect of the decision in Taupo Totara Timber v Rowe	4.44
Option 3:      Amend sections 312-316 to make it clear that they do not apply to covenanted payments	4.47
Option 4:      Extend the provisions of sections 312-316 to former directors	4.48
Option 5:      Extend the provisions of sections 312-316 to cover payments to connected persons	4.49
Option 6:      Require approvals by company in general meeting under sections 312 and 313 to be by special resolution and where disclosure under those sections or section 314 is required, stipulate that disclosure should cover payments made on the same occasion for which disclosure is not required by those sections	4.50
Option 7:      Non -contractual payments received for loss of other offices	4.51
Option 8:      Deem payments approved if notified and shareholders members raise no objection to the proposed payment within a stipulated period	4.54
Option 9:      Amend section 314 and 315 to cover acquisitions by way of a cancellation of shares under schemes of arrangement etc	4.55
Option 10:    Amend section 312-314 to provide civil remedies against the directors and section 315 so that a claim under this sections has priority where the amount paid to the director was taken into account in determining the price to offeree shareholders	4.56
Option 11:    Reinforce section 316(3) by requiring companies to disclose in their annual accounts particulars of the calculation of compensation paid to a director	4.60
Option 12:    Extend section 312 to cover the situation where the payment is made by a company to a director of its holding company in connection with loss of office as such director	4.61
Section 317:  Disclosure by directors to their board	4.62
General	4.62
Effect of section 317	4.71
Stock Exchange requirements	4.81
Requirements of the codes	4.83
(a)   The corporate governance reports	4.83
(b)   The Combined Code	4.85
What must a director disclose?	4.87
Disclosure of interests already known to the board	4.88
Disclosure by a sole director	4.91
Voting by the interested director	4.93
Options for reform	4.94
Option 1:      No change	4.95
Option 2:      Limit the duty of disclosure to material interests only	4.96
Option 3:      Exempt from the obligation of disclosure transactions or arrangements which either do not come before the board or a committee of the board, or do not require approval by the board or a committee of the board	4.98
Option 4:      Exempt sole director companies	4.100
Option 5:      Exempt from the obligation of disclosure interests in director's own service agreement	4.102
Option 6:      Exempt from the obligation of disclosure executive directors' interests in contracts or arrangements made for the benefit of all employees	4.103
Option 7:      Exempt from the obligation of disclosure interests arising by reason only of a directorship of, or non-beneficial shareholding in, another group company	4.104
Option 8:      Exempt from disclosure an interest of which a director has no knowledge and of which it is unreasonable to expect him to have knowledge	4.105
Option 9:      Make any contract voidable where the requisite disclosure has not been made and provide a civil remedy for compensation or disgorgement, or alternatively provide that the section does not affect any resulting contract	4.106
Option 10:    Disqualify directors of public companies from voting on matters in which they have an interest or a material interest	4.114
Option 11:    Require directors to disclose material interests of their connected persons of which they are aware	4.115
Option 12:    Require that general notice under section 317(3) include details of the interest concerned	4.116
Option 13:    Require a register of directors interests to be kept which would be open to inspection by members or require a report to be made to shareholders in the annual accounts of the nature of interests which directors had disclosed	4.117
Section 318:  Directors' service contracts (1)	4.119
General	4.119
The Stock Exchange Listing Rules	4.125
The Combined Code	4.127
The City Code	4.129
Options for reform	4.131
Option 1:      No change	4.133
Option 2:      The Secretary of State should have power to disapply section 318 to the extent that, in the Secretary of State's opinion, a company is already bound by sufficient comparable disclosure obligations under the Listing Rules	4.135
Option 3:      Extend section 318 to contracts for services and non-executive directors' letters of appointment	4.137
Option 4:      Repeal of subsection (5) (Director to work abroad)	4.140
Option 5:      Repeal of subsection (11) (Contract with less than 12 months to run)	4.145
Option 6:      Amend section 318 to require disclosure of particulars of terms collateral to the service contract	4.148
Option 7:      Allow public inspection of directors' service contracts	4.151
Section 319:   Directors service contracts (2)	4.153
General	4.153
Listed companies and self-regulation	4.157
(a)   Recommendations of the Cadbury, Greenbury and Hampel Committees	4.158
(b)   The Combined Code	4.159
"Rolling" contracts, fixed-term contracts and long notice periods	4.161
Options for reform	4.163
Option 1:      No change	4.164
Option 2:      Reduce the statutory period in section 319(1) from 5 years to 1, 2 or 3 years	4.165
Option 3:      Amend section 319 to prohibit (without shareholder approval) the creation of "rolling contracts" having a notice of contract period in excess of the period permitted by section 319	4.169
Option 4:      Deem terms approved if notified and members raised proposed term within a stipulated period	4.170
Section 320-322:  Substantial property transactions involving directors etc	4.172
Section 320	4.173
Section 321	4.175
Section 322	4.177
The Stock Exchange Listing Rules	4.182
AIM Rules	4.186
The City Code	4.187
Overlap with section 316(3) and the effect of the definition of "non-cash asset" in section 739	4.189
Options for reform	4.190
Option 1:      No change	4.191
Option 2:      Amend section 320 so that it does not prohibit a company from making a contract which is subject to a condition that the company first obtains approval under section 320	4.192
Option 3:      Amend section 320 to make it clear that it does not apply to covenanted payments under service agreements with directors or to payments to which section 316(3) applies	4.193
Option 4:      A safe harbour for transactions with administrative receivers and court-appointed administrators	4.194
Option 5:      Give the Secretary of State power to exempt listed companies from section 320	4.195
Option 6:      Dispense with the requirement for shareholder approval where the independent non-executive directors approve the transaction	4.197
Option 7:      Deem payments approved if notified and members raise no objection to the proposed payment within a stipulated period	4.200
Option 8:      Provide that shareholder approval is not required if an expert reports that in his opinion the transaction was fair and reasonable	4.201
Option 9:      Provide that the statutory consequences of breach apply only where the company suffers prejudice	4.203
Section 322A:   Transactions beyond the directors' powers	4.205
Section 322B:  Contracts with sole member directors	4.210
Section 323 and 327:  Prohibition on option dealing with directors and their near families	4.214
General	4.214
Insider dealing	4.217
The Criminal Justice Act 1993	4.219
The Stock Exchange Model Code	4.223
Options for reform	4.225
Option 1:      No change	4.226
Option 2:      Make off-market dealings in options with inside information an offence	4.227
Option 3:      No change, but exempt dealings in options under a scheme for the benefit of employees	4.229
PART 5:  SUBSTANTIVE IMPROVEMENTS 2:  DISCLOSURE OF DIRECTORS' SHARE DEALINGS (SECTIONS 324-326, 328-329 AND SCHEDULE 13)
Introduction	5.1
The obligation of disclosure:  Sections 324 and 328 - duty of director to notify own and attributed shareholdings in company	5.6
General	5.6
The DTI's August 1996 proposals	5.8
Consultees' response and the DTI's conclusion	5.13
Option for reform:   Exempt from disclosure under section 324 directors' non-beneficial interests	5.19
The meaning of "interest" and the mechanics of disclosure:  Schedule 13, Parts I-III	5.20
General	5.20
The company's register of directors' interests:  Sections 325 and 326 and Schedule 13, Part IV	5.27
General	5.27
The DTI's August 1996 proposals	5.28
Consultees' response and the DTI's conclusion	5.29
Remaining issues for consideration	5.30
Notification to the exchanges:  Section 329	5.31
General	5.31
The DTI's August 1996 proposals	5.33
Consultees' response and the DTI's conclusion	5.36
PART 6:  SUBSTANTIVE IMPROVEMENTS 3:  LOANS AND SIMILAR TRANSACTIONS (SECTIONS 330-342)
Introduction	6.1
Sections 330 and 331:  General restriction on loans etc to directors and persons connected with them and definitions for the purposes of section 330 and subsequent sections	6.10
Explanation of the prohibitions	6.10
Are restrictions other than on making loans to directors        necessary?	6.12
To which companies should the prohibitions extend?	6.13
Sections 322-338:  Exemptions from prohibitions	6.15
(1)     Short-term quasi-loans (section 332)	6.15
(2)     Intra-group loans (section 333)	6.16
(3)     Loans of small amounts (section 334)	6.17
(4)     Minor transactions (section 335(1))	6.18
(5)     Transactions in the ordinary court of business                (section 335(2))	6.19
(6)     Transactions at the behest of the holding company                (section 336)	6.21
(7)     Funding of director's expenditure on duty to the company                (section 337)	6.22
(8)     Loan or quasi-loan by a money-lending company                (section 338)	6.24
Sections 339-340: "Relevant amounts" for purposes of section 334 and other sections and determining the "value" of transactions or arrangements	6.26
Section 341:  Civil remedies	6.29
Section 342:  Criminal penalties for breach of section 330	6.31
A possible additional exemption for loans made with the consent of shareholders	6.33
Safeguards for shareholders	6.35
Safeguards for creditors	6.37
Option (1):   The company must have to provide for the whole of the value of the transaction out of its distributable profits	6.37
Option (2):   The company's directors must make a statutorydeclaration as required by section 173 of the Companies Act 1985	6.38
To what types of transactions and companies should the new exemption refer?	6.40
Publicity requirements	6.42
Options by members or creditors	6.43
PART 7:  SUBSTANTIVE IMPROVEMENTS 4:  DISCLOSURE OF TRANSACTIONS IN WHICH DIRECTORS AND THEIR CONNECTED PERSONS ARE INTERESTED IN THE ANNUAL ACCOUNTS (SCHEDULE 6, PART II) AND THE SPECIAL PROVISIONS FOR BANKS (SECTIONS 343 AND 344)
Introduction	7.1
Schedule 6, Part II:  Disclosure in annual accounts of transactions in which directors are interested	7.5
General	7.5
Materiality	7.6
Sections 343-344:  Special provisions for banks	7.12
PART 8:  SUBSTANTIVE IMPROVEMENTS 5:  CONNECTED PERSONS (SECTION 346) AND REMAINING SECTIONS OF PART X OF THE COMPANIES ACT 1985
Introduction	8.1
Section 346:  The meaning of connected person	8.2
General	8.2
Option for reform (1):  Make specified additions to the list of       connected persons	8.14
Option for reform (2):  Give the Secretary of State power to vary       the list by regulation	8.18
The remaining sections of Part X	8.19
PART 9:  FURTHER OPTIONS:  (1) CAN SECTIONS IN PART X BE REPEALED?  (2) WOULD PART X BE IMPROVED IF IT WAS REWRITTEN?
Introduction	9.1
Option 1:  Repealing sections in Part X	9.3
Repealing groups of sections and relying on the general law	9.3
Practical consequences of relying on the general duties	9.8
Substantive differences between sections 312-316, 320-322 and 330-342 and the general law	9.16
Reasons for repealing sections 312-313, 320-322 and 330-342	9.22
Reasons for retaining these sections	9.25
Repeal of section 311 (Prohibition on tax-free payments to directors)	9.30
Repeal of section 323 (Option dealing with directors)	9.33
Option 2:  Can Part X be improved by rewriting	9.34
PART 10:  SHOULD PART X OF THE COMPANIES ACT 1985 BE DECRIMINALISED
Introduction	10.1
(1)  Description of the various offences in Part X	10.10
Introduction - mens rea and the concept of "officer in default"	10.10
Summary of specific offences in Part X	10.13
Section 314(3):  Director's duty of disclosure on takeover etc	10.13
Section 317(7):  Directors to disclose interest in contracts	10.14
Section 318(8):  Directors' service contracts to be open to inspection	10.15
Section 322B:   Contracts with sole members who are directors	10.16
Section 323(1):  Prohibition on directors dealing in share options	10.17
Section 324(7):  Duty of director to disclose shareholdings in own company	10.18
Section 326(2):  Sanctions for non-compliance with section 325 etc	10.20
Section 329(3):  Duty to notify stock exchange of matters notified under preceding section	10.21
Section 342(1)-(3):  Criminal penalties for breach of section 330 in relation to prohibited loans	10.23
Section 343:  Record of transactions not disclosed in company accounts	10.23
(2)  Are there alternative sanctions for these breaches?	10.24
(i)      Civil remedies for breach of those provisions of Part X which also involve criminal sanctions	10.25
(ii)     Winding up by the court	10.28
(iii)    Company Directors Disqualification Act 1986	10.29
(iv)    Section 459 unfair prejudice remedy	10.31
(v)     Self-regulatory rules	10.32
(vi)    Investigation	10.33
(3)  Are civil penalties appropriate?	10.34
(4)  The arguments for and against attaching criminal sanctions to breaches of Part X	10.37
(5)  Should a new offences  be created where payments are made in breach of sections 312-316 of the Companies Act 1985?	10.40
SECTION B:  THE CASE FOR A STATUTORY STATEMENT OF DIRECTORS' DUTIES UNDER THE GENERAL LAW   PART 11:  FIDUCIARY DUTIES:  THE CURRENT LAW
Introduction	11.1
Directors as fiduciaries	11.2
The classification of directors' fiduciary duties	11.4
Loyalty	11.5
Proper purpose	11.6
No fetters on discretion	11.11
No conflict and no-profit rules	11.13
Duty to act in accordance with the company's constitution	11.18
Duty to deal fairly as between different shareholders	11.19
To whom do the directors owe their fiduciary duties?	11.21
Ratification by the company in general meeting	11.30
Where no question of insolvency or illegality arises	11.30
Where the company's solvency is prejudiced	11.39
Where the act is illegal or outside the company's powers	11.40
Capping directors' liabilities 1:  By order of the court under section 727 of the Companies Act 1985	11.41
Capping directors' liabilities 2:  Statutory prohibition of indemnities under section 310 of the Companies Act 1985 and the possibility of ad hoc releases	11.46
History of section 310	11.48
Relationship between section 310 and articles which modify the        no conflict rule	11.49
Release of claims arising against directors	11.52
D&O insurance	11.53
PART 12:  DUTY OF CARE:  THE CURRENT LAW
The traditional view	12.3
The modern view	12.8
A stricter duty in negligence	12.8
Reliance on co-directors, officers, auditors and professional advisers	12.12
Co-directors and officers	12.13
Auditors, solicitors and other outside advisers	12.17
Trustees' duty of skill and care	12.20
Duty of directors under German law	12.26
Introductory remarks:  Director's liability for due care	12.27
Burden of proof	12.31
Release from liability	12.32
PART 13:  PREVIOUS PROPOSALS FOR A STATUTORY STATEMENT OR DIRECTORS DUTIES
The Davy Committee	13.2
The Greene Committee	13.6
The Jenkins Committee	13.7
Attempts to introduce statutory statements of the duties of directors	13.11
Companies Bill 1973	13.11
Companies Bill 1978 clauses 44 and 45	13.13
PART 14:  A STATEMENT OF DIRECTORS' DUTIES:  OPTIONS FOR REFORM
Introduction	14.1
Criticisms of the inaccessibility of the present law	14.4
Option 1:  A comprehensive codification	14.8
General	14.8
Arguments in favour of codification	14.9
Arguments against codification	14.13
Previous consideration of codification	14.22
Option 2:  Partial codification of directors' fiduciary duties	14.23
Option 3:  Statutory statement of directors' duties not replacing the general law	14.25
Option 4:  A non-binding statement of the main duties of directors to be used in prescribed forms etc	14.32
Option 5:  Authoritative pamphlets	14.41
PART 15:  DUTY OF CARE:  OPTIONS FOR REFORM
Introduction	15.1
Current position in respect of the standard of care	15.3
Should there be a statutory statement of the duty of care?	15.6
Content of a statutory statement of the duty of care	15.10
Option 1:  A subjective test	15.11
Option 2:  A dual objective/subjective test	15.20
Option 3:  An objective test only	15.29
Matters of commercial judgment	15.30
The business judgment rule in the United States	15.32
The Australian approach	15.35
South Africa	15.40
If there is to be a statutory statement of the director's duty of        care, should there be a statutory business judgment rule?	15.41
Reliance and delegation	15.42
Statutory statement of the duty of care without a statutory statement of fiduciary duties	15.51
SECTION C:  MISCELLANEOUS MATTERS
PART 16:  EMPIRICAL SURVEY OF DIRECTORS
Introduction	16.1
Empirical research	16.2
Geographical considerations and acknowledgements	16.8
PART 17:  HOW SHOULD THE LAW APPLY TO DIFFERENT CATEGORIES OF DIRECTOR?
Introduction	17.1
The classification of directors	17.2
De jure directors	17.4
De facto directors	17.5
Shadow directors	17.11
Alternate directors	17.17
Executive and non-executive directors	17.21
Nominee directors	17.29
PART 18:  SUMMARY OF QUESTIONS FOR CONSULTATION
APPENDIX A:  DRAFT CLAUSES RELATING TO DIRECTORS' DUTIES AND DRAFT STATEMENT OF DIRECTORS' DUTIES	Appendix A
APPENDIX B:  DRAFT PROVISIONS ON LOANS TO DIRECTORS	Appendix B
APPENDIX C:  TABLE OF DERIVATIONS	Appendix C
APPENDIX D:  EXTRACTS FROM THE STOCK EXCHANGE'S COMBINED CODE	Appendix D
APPENDIX E:  EXTRACTS FROM THE LISTING RULES OF THE STOCK EXCHANGE	Appendix E
APPENDIX F:  CADBURY CODE OF BEST PRACTICE	Appendix F
APPENDIX G:  CADBURY STATEMENT OF DIRECTORS' RESPONSIBILITIES	Appendix G
APPENDIX H:  EXTRACTS FROM AUSTRALIAN CORPORATIONS LAW	Appendix H
APPENDIX I:  EXTRACTS FROM NEW ZEALAND COMPANIES ACT 1993	Appendix I
APPENDIX J:  EXTRACTS FROM THE CANADIAN BUSINESS CORPORATIONS ACT 1985	Appendix J
APPENDIX K:  ARTICLE 93 OF THE GERMAN STOCK CORPORATION ACT	Appendix K
APPENDIX L:  EXTRACTS FROM THE REVIEW OF THE HONG KONG COMPANIES ORDINANCE - CONSULTANCY REPORT (MARCH 1997)	Appendix L
APPENDIX M:  EXTRACTS FROM THE CITY CODE ON TAKEOVERS AND MERGERS	Appendix M
APPENDIX N:  FINANCIAL REPORTING, STANDARD 8 RELATED PARTY DISCLOSURES (FRS 8)	Appendix N
APPENDIX O:  LIST OF INDIVIDUALS AND ORGANISATIONS WHO HAVE ASSISTED WITH THE PROJECT	Appendix O


 
GLOSSARY OF ABBREVIATIONS

AGM - Annual general meeting

AIM - Alternative Investment Market

AktG - the German Stock Corporation Act

CBCA - Canada Business Corporations Act 1974-75-56

the Cadbury Committee - the Committee on the Financial Aspects of Corporate Governance, chaired by Sir Adrian Cadbury

the Cadbury Report - Report of the Committee on the Financial Aspects of Corporate Governance (December 1992)

the Cadbury Code of Best Practice - incorporated in the Report of the Committee on the Financial Aspects of Corporate Governance (December 1992)

CBI - Confederation of British Industry

CISCO - the City Group for Smaller Companies

the City Code - the City Code on Takeovers and Mergers

CJA - Criminal Justice Act 1993

CLERP - the Australian Corporations Law and Economic Reform Programme

the Combined Code - the London Stock Exchange's Principles of Good Governance and Code of Best Practice

CSLRC - Companies and Securities Law Committee (Australia)

the Cohen Committee - the Committee on Company Law Amendment, chaired by Mr Justice Cohen

the Cohen Report - the Report of the Committee on Company Law Amendment, chaired by Mr Justice Cohen (1945) Cmd 6659

the Davey Committee - Report of the Departmental Committee to enquire what amendments are necessary in the acts relating to joint stock companies incorporated with limited liability under the Companies Acts, 1862-1890, chaired of Lord Davey (1895)

the Dickerson Report - Proposals for a New Business Corporations Law for Canada (1971)

D&O insurance - Directors and officers liability insurance

Draft Civil Proceedings Rules - Access to Justice, Draft Civil Proceedings Rules (July 1996)

DTI - the Department of Trade and Industry

the DTI's Consultative Paper - Modern Company Law for a Competitive Economy (March 1998)

the DTIs company law review - the DTI's review of company law launched in March 1998

EGM - extraordinary general meeting

ESRC Centre for Business Research - Economic and Social Research Council, Centre for Business Research at the University of Cambridge

FRS - Financial Reporting Standard

FTSE 100 & 350 - the FTSE International compiled indices of, respectively, the top 100 and 350 companies, by market capitalisation, quoted on the London Stock Exchange. FTSE International is jointly owned by the Financial Times and the Stock Exchange.

Greene Committee - the Company Law Amendment Committee 1925/26, chaired by Sir Wilfred Greene

the Greenbury Committee - the study Group on Directors' Remuneration, chaired by Sir Richard Greenbury

the Greenbury Report - Directors' Remuneration: the Report of a study Group, chaired by Sir Richard Greenbury (July 1995)

the Hampel Committee - the Second Committee on the Financial Aspects of Corporate Governance, chair by Sir Ronald Hampel

the Hampel Report - Final Report of the Committee on Corporate Governance, chaired by Sir Ronald Hampel (January 1998)

the Hong Kong Consultancy Report - The Review of the Hong Kong Companies Ordinance - Consultancy Report (March 1997)

the Jenkins Committee - the Company Law Committee, chaired by Lord Jenkins

the Jenkins Report - the Report of the Company Law Committee, chaired by Lord Jenkins (1962) Cmnd 1749

the King Committee - Committee set up by the Institute of Directors in Southern Africa under the chairmanship of Mervyn E King SC to consider various areas of corporate governance

the King Report - the King Report on Corporate Governance (29 November 1994)

the Listing Rules - the Listing rules for the official list of the London Stock Exchange

the Model Code - a code of dealing for transactions in securities by directors, certain employees and connected persons, which appears in an appendix to chapter 16 of the Listing Rules

OECD - the Organisation of Economic Co-operation and Development

PIRC - Pensions and Investment Research Consultants Ltd

plc - public limited company

the Registrar - the registrar performing the duty of registering companies under the Companies Act 1985 in England and Wales or Scotland

SAS - Statement of Accounting Standards

Table A - Companies Act 1985, Table A (SI 1985/805, Schedule)

Woolf Interim Report - Access to Justice, Interim Report to the Lord Chancellor on the Civil Justice System in England and Wales (June 1995)

Woolf Report - Access to Justice, The Final Report to the Lord Chancellor on the Civil Justice System in England and Wales (July 1996)