Government proposals intended to clarify the extent of directors' duties are only likely to lead to greater confusion, leading corporate lawyers have warned.

The draft Company Law Reform Bill, outlined in last week's Queen's Speech, is to set out directors' duties by means of a statutory statement.


But the move is opposed by the Law Society's company law committee, which argues that any such statement would be superficial.


Knapp: address uncertainty

Vanessa Knapp, chairwoman of the committee and partner at City firm Freshfields Bruckhaus Deringer, said it would be difficult in practice to put directors' duties down in writing.

There is also a danger that directors will think that the code represents the extent of their duties, she said. 'In fact it is only their fiduciary duties, and there is a lot more besides,' Ms Knapp added.


The company law committee also predicts that as soon as the code comes into force, there will be a judgment in the courts overturning the interpretation of a duty.



Ms Knapp called on the government to address, through the Bill, the uncertainty faced by business groups when it comes to the distribution of a company's assets, following the case of Aveling Barford v Perion and Others [1989] BCLC 626.



Meanwhile, the Institute of Chartered Secretaries and Administrators (ICSA) slammed a proposal in the draft Bill to remove the requirement for all private companies to appoint a company secretary as 'badly flawed' and 'fundamentally mis-targeted'.


The move would take away a vital safeguard against company fraud, ICSA argued - pointing to the fact that some private businesses are massive concerns.


ICSA chief executive John Ainsworth said: 'If this measure is seen as deregulation, it is one that will rebound on the government. The company secretary provides a watchful eye over the directors' conduct, helping to protect the investments of shareholders.'