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ACCA Applied Knowledge · Financial Accounting · Duties and responsibilities of those charged with governance

Which of the following is a statutory-type duty that directors owe to the company they manage?

Directors owe a duty to act in the way they consider, in good faith, most likely to promote the success of the company. They cannot guarantee profits, do not override share class dividend rights, and do not perform the external audit, which is independent.

  1. AA duty to act in the way they consider most likely to promote the success of the companyCorrect
  2. BA duty to guarantee that the company will earn a profit each year
  3. CA duty to ensure that every shareholder receives the same dividend regardless of share class
  4. DA duty to carry out the external audit of the company

Explanation

Directors owe duties such as acting in good faith to promote the company's success, exercising skill and care, and avoiding conflicts of interest. They cannot guarantee profit, and share class rights determine dividends. Audit is performed by an independent auditor, not the directors.

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