The government's proposed statutory code of directors' general duties could significantly reduce the number of people prepared to become non-executive directors, company lawyers have warned.

The code - included in a white paper on company law reform - would require directors to avoid a situation where their interests may possibly conflict with the company's interests.


A joint submission by the Law Society's company law committee, the City of London Law Society and the Bar Council claimed this 'could dramatically affect' the recruitment of non-executive directors, who may be unable to satisfy their duties to more than one company.


Vanessa Knapp, chairwoman of the Law Society committee, said another problem arose with the new duty to promote the success of the company for the benefit of its members; currently directors must act in the company's best interests.



'This could create problems for directors facing hostile takeover bids (or competing bids), because they would have to balance their shareholders' desire to receive the best price for their shares, against the ongoing future interests of the company and those who depend on it.'