Compay Law

Topics: Law, Standard of care, Reasonable person Pages: 4 (929 words) Published: March 17, 2012

Recently, the Lego Bill Committee is considering codifying directors’ duty of care and skill for the sake of clarification of such a duty. ( clause 456, 457). This essay intends to exam whether such a codification is desirable or not. In the following, the current situation of director duty of care and skill will be reviewed. Afterwards, pros and cons of such a codification will be considered. Finally, the essay will conclude my opinion on the codification.

Current Regulation on directors’ duty of care and skill

Currently, Hong Kong does not have any provision regarding the directors’ duty of care and skill and it is acknowledged that the general principles of directors’ duty of care and skill are derived from an old case: Re City Equitable Fire Insurance Co Ltd . To put it simple, City Equitable principles basically consider what a reasonable director who processes similar knowledge and experience will do under the circumstance. Such an approach is often view as an objective test. The standard imposed on the director highly depends on the ability of him. If the director is not qualified, the outcome will likely be discharging this director any potential liability. Apart from this, directors are also not bound to give continuous attention to the company and he is justified in trusting official performing duties with honesty under City Equitable.

Law Wai Duen v Boldwin Construction Co. Ltd

Afterwards, Judge Hoffmann LJ in a later case Re D’Jan Ltd proposed that the directors’ duty of care and skill should be considered by a two-fold subjective/objective test. Still, City Equitable is the leading case in Hong Kong when it comes to determination directors’ duty of care. Moreover, the CR suggestion.

Proposed Provision on Codifying Directors’ Duty of care and skill

Currently, it is proposed that the directors’ duty of care and skill should be codified and a mixed subjective/objective approach should be adopted. The...
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