ACCA · Question 55 · Corporate and Business Law
SCENARIO 4: AquaGrid PLC, a regional water utility, is considering a major infrastructure upgrade. The board of directors is split. Director A wants the cheapest option to maximize short-term shareholder dividends. Director B wants a more expensive, eco-friendly option, arguing it benefits the local community and ensures long-term sustainability, even if it reduces dividends this year.
Under Section 172 of the Companies Act 2006 (Duty to promote the success of the company), which approach is legally correct?
Answer options:
Director A's approach is strictly required, as shareholder wealth maximization is the only legal consideration.
Director B's approach is more aligned with s.172, as directors must have regard to the long-term consequences, the community, and the environment.
Neither; the directors must let the shareholders vote on operational infrastructure decisions.
Director A's approach, because environmental factors are strictly voluntary CSR initiatives.
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