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ACCA Applied Skills · Corporate and Business Law (Global) · Company directors

Dario was appointed director of Vega Ltd by a board meeting that, unknown to him, was not quorate, so the appointment was defective. Dario then acted as director for a year and Vega dealt with Brightco, a third party that knew nothing of the defect. Which statement best reflects the usual protection under company law?

Dario's acts remain valid against Brightco because company law protects third parties who deal in good faith with someone acting as a director, even where the appointment is later found defective. No prior court ratification is needed.

  1. AActs done by Dario in dealings with Brightco are generally valid despite the defect in his appointment, since a third party acting in good faith is protectedCorrect
  2. BAll of Dario's acts are void and Brightco can never enforce any contract
  3. CDario's acts are valid only if the court has first ratified his appointment

Explanation

Company law protects outsiders dealing in good faith: acts of a person acting as director are valid even if a defect in appointment is later discovered. Brightco did not know of the defect so it can rely on the acts. No prior court ratification is needed.

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