1.2. Duty to act within powers (section 171)
A director must act in accordance with the company's constitution and must only exercise his powers for their proper purpose.
A company's constitution includes:
• The company's articles (and memorandum).
• Decisions taken in accordance with the articles.
• Other decisions taken by the members or a class of them, where treated by law as equivalent to decisions of the company.
• Any resolutions and agreements affecting a company’s constitution.
The liability is strict and therefore if your substantial purpose was not the purpose for which the power was conferred, it will not matter if you exercised the power in good faith or in the belief that it would promote the success of the company for the benefit of the members as a whole.
If you have any question on any of those matters, or on any of the matters covered below, whether now or in the future, you should contact David Heys at Lawson West LLP on 0116 212 1027 or by email at dheys@lawson-west.co.uk.
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