Company Law: Reform

Under Section 172 of the Companies Act 2006, directors have a fiduciary duty to have regard in their decision-making to the interests of employees, customers and suppliers, and to the impact of the company’s operations on the community and the environment. Section 172 enshrines in law the principle of “enlightened shareholder value”, which recognises the relevance of stakeholder interests to the long-term success of a company. This contrasts with the “shareholder maximisation” model adopted in other jurisdictions, in which directors’ sole duty is to maximise returns to shareholders. The Government has no plans to amend Section 172.