A comparative analysis of the control of self-dealing by company directors

Abstract

This thesis examines one of the most topical areas of corporate governance: the control of self-dealing by company directors. Four legal systems, namely, the Maltese, the English, the Italian and the US systems will be examined in an attempt to identify features in the Companies Act, 1995 that may need to be revised or that may be missing altogether. The first chapter attempts to identify the legal nature of the office of the director, his duties and those to whom such duties are owed. The following chapters focus more closely on the issue of self-dealing. Chapter 2 considers the general rule requiring directors not to act in conflict with the interests of their company (the no-conflict rule) and the duty requiring directors to disclose a conflicting interest. Chapter 3 examines in detail the specific prohibitions emanating from the no-conflict rule. In particular, this chapter examines the prohibitions preventing companies from making loans to their directors, directors' remuneration and the restrictions on the directors' ability to compete with their company. Chapter 4 deals with the so-called "no-profit rule", that is, the restrictions on the ability of directors to derive a profit from their position. This chapter contrasts the strict, policy-based approach adopted in the UK and the US, where directors are liable to account for any profits made, with that prevailing in Italy and in Malta, where directors' liability for profits is attached to the loss suffered by the company. Chapter 5 abandons the purely legal analysis that characterises the preceding chapters. This Chapter examines the possibility of varying or excluding altogether directors' duties to their company by taking into account considerations of economic relevance. In the last chapter, focus is reverted onto the shortcomings of the Companies Act, 1995. This chapter examines the possibility of encapsulating directors' duties within the Act through a process of codification. It is contended that this process should remedy, at least in part, a serious structural deficiency that renders the anti-self-dealing framework created by the Act particularly weak.