Company Law and Compliance: Duties, Liability and Controls
Core concepts
Candidates must know the duties directors owe: to act within powers, promote the success of the company, exercise independent judgement, exercise reasonable care, skill and diligence, avoid conflicts, not accept benefits from third parties, and declare interests in proposed transactions. Understand the business judgement rule or its equivalent, the distinction between a director's duty to the company and duties owed to shareholders individually, and the mechanics of derivative claims. Learn the building blocks of compliance programmes: risk assessment, policies, training, monitoring, whistleblowing channels, investigation and remediation. Know the difference between civil and criminal liability, strict versus fault-based offences, and the treatment of corporate liability for the acts of employees.
Traps in questions
- The duty is owed to the company, not to a controlling shareholder or to creditors generally, except in insolvency-adjacent situations.
- Conflicts require authorisation or avoidance, not merely disclosure to a colleague.
- Delegation does not transfer accountability; directors remain responsible for oversight.
- A compliance policy is not a defence by itself; effectiveness and culture matter.
- Whistleblower protection usually requires a prescribed route, not any public disclosure.
Worked rule of thumb
Apply the conflict sequence: identify the interest, disclose it to the board, obtain authorisation where permitted, recuse from voting, and record the decision in minutes. Questions that skip recusal or minutes usually mark the wrong answer.