Although the common law duties have been extended and incorporated into Company Law, the Act states that they will be enforced in the same way as the common law. As a result there are no penalties in the Companies Act 2006 for failing to undertake the above duties correctly.
Enforcement is via an action against the director for breach of duty. Currently such an action can only be brought by:
Where the company is controlled by the directors these actions are unlikely.
However the Act has also introduced new legislation whereby an individual shareholder can take action against a director for breach of duty. This is known as a derivative action and can be taken for any act of omission (involving negligence), default or breach of duty or trust.
Following concerns that there could be a significant increase in shareholder actions, as a result of the modifications to the law, a series of provisions has been built into the regulations in order to safeguard against abuses of the new procedure. The most important of these is that the shareholder must apply to the court for permission to take such an action and until this is granted the company can continue to act on its decisions. The law states that a court cannot give such permission if a person acting in the best interests of the company would not pursue such an action.
It is considered that this will prevent vexatious and malicious actions by disgruntled or activist shareholders and avoid unnecessary injunctions.