Corporate Law and Governance: Duties, Structures and Accountability
The corporate form and its organs
Understand separate legal personality and limited liability, and the consequences: the company contracts in its own name and shareholders have no direct claim on company assets. Know the roles of the board of directors, the shareholders in general meeting, the auditor and the company secretary. Distinguish ordinary resolutions (simple majority) from special resolutions (typically a 75% majority) and know which matters require each.
Directors' duties
Directors owe fiduciary and statutory duties: to act within powers and in good faith in the company's best interests, to exercise independent judgement and reasonable care and skill, to avoid conflicts of interest, not to accept benefits from third parties, and to declare interests in proposed transactions. The business judgement defence protects informed, disinterested decisions made in good faith.
Governance codes and accountability
Know the substance of good governance: board independence and balance, separation of the chair and chief executive, audit and remuneration committees of independent directors, risk management and internal control, transparent disclosure, and shareholder rights. Understand the agency problem between owners and managers and the mechanisms that mitigate it - independent boards, audit, incentives and disclosure.
Traps and rule of thumb
- Confusing the board's authority with shareholder authority; shareholders generally do not manage.
- Assuming a director is liable for company debts - the veil is lifted only in narrow cases (fraud, personal guarantees, statutory liability).
- Treating governance code provisions as strict law when many operate on a comply-or-explain basis.
Rule of thumb: when a question describes a director taking a personal opportunity that the company could have taken, the breach is of the no-conflict duty - disclosure and independent approval are the remedy, not hindsight justification.