Validity of acts of directors
Part 10 A company's directors
(1)The acts of a person acting as a director are valid notwithstanding that it is afterwards discovered—
(a)that there was a defect in his appointment;
(b)that he was disqualified from holding office;
(c)that he had ceased to hold office;
(d)that he was not entitled to vote on the matter in question.
(2)This applies even if the resolution for his appointment is void under section 160 (appointment of directors of public company to be voted on individually).
In the Companies Acts “director” includes any person occupying the position of director, by whatever name called.
Defined in s.250 · see it in the full ActThe court held that the validation provision did not assist because Mr Price’s appointment as a director of SGL had never occurred, rather than being defective. It would not in any event bind absent parties to the shareholders’ agreements. (see paras [107]-[108])
The court interpreted section 161(1)(c) as validating acts by a person acting as a director notwithstanding that he had ceased to hold office, including on expiry of his appointment. The protection remained subject to notice, directors’ duties and the claimant’s choice whether to invoke the validation. (see paras [53]-[62])
Applied to validate the loan entered into by a person acting as a director despite a possible defect in his appointment or entitlement to vote. The provision contains no exception for a counterparty aware of a dispute about the directors’ status. (see paras [66]-[70])
What each judgment says about section 161 is in the case-law panel in the full Act.
288.This section, which replaces section 285 of the 1985 Act, provides that a director’s actions are valid even if his or her appointment is subsequently found to have been defective or void.