Management, administration and the regulation of companies — ACCA Practice Question 18

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Recall the 'Enlightened Shareholder Value' approach embedded in s.172 CA 2006. Directors must promote success for members, but must 'have regard to' a list of factors, including the environment.

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B.They must have regard to the impact of the company's operations on the community and the environment when making their decision.✓ Correct

Section 172 of the Companies Act 2006 embodies the principle of 'enlightened shareholder value'. While the primary duty is to act in a way most likely to promote the success of the company for the benefit of its members as a whole, the directors must 'have regard to' several factors, including (under s.172(1)(d)) the impact of the company's operations on the community and the environment.

Common mistakes

Believing that maximizing profit is the *only* legal consideration, or conversely, believing that environmental concerns legally override shareholder interests.

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Common mistakes

Practice the full ACCA LW — Corporate and Business Law Practice Exam 2

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