CA 2006, s 170(4) requires us to interpret the new law by reference to pre-existing common law and equitable principles. In the case of the duty to promote the success of the company (s 172) its origins can be found in the established principle that a director must act bona fide in the best interests of the company and utilise his powers for the purposes for which they were conferred1. In reality these are two duties and they are now split between two sections ie the duty to act in accordance with the company’s constitution and only exercise powers for intended purposes (s 171) and the duty to promote its success (s 172). We discuss abuse of powers in Ch 5 and need only say a few further words about “best interests” and “bona fide” here. The test is a largely subjective one. The Court does not attempt to gainsay the opinion of the directors on commercial matters if they have genuinely decided on a course of action. However, it is not “in the interests of the company” to use its conferred powers irregularly, whatever the intention may be. In Bamford v Bamford2 the directors issued shares to frustrate a takeover bid which was a misuse of their powers. The fact that they were honest and well-intended did not prevent this being a breach of the duty of good faith, since they were mistaken as to the interests of the company as a whole (shareholders are entitled to receive bids), but the transaction being voidable was nevertheless capable of being ratified by the company as the injured party, in the absence of any director’s personal gains.

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