ExpertACCA · Question 55 · Management, administration and the regulation of companies
Section B - Scenario 4
HarvestYield plc is a large agricultural company. The board of directors decides to close a profitable local farm to consolidate operations in a mega-farm 100 miles away. This decision will devastate the local rural economy and cause 50 redundancies. The directors made the decision solely to increase the annual dividend for shareholders.
Under s.172 of the Companies Act 2006, have the directors breached their duty to promote the success of the company?
Section B - Scenario 4
HarvestYield plc is a large agricultural company. The board of directors decides to close a profitable local farm to consolidate operations in a mega-farm 100 miles away. This decision will devastate the local rural economy and cause 50 redundancies. The directors made the decision solely to increase the annual dividend for shareholders.
Under s.172 of the Companies Act 2006, have the directors breached their duty to promote the success of the company?
Answer options:
No, because their only legal duty is to maximize short-term profits for shareholders.
Potentially yes, if they failed to have regard to the impact on the community, employees, and long-term consequences.
Yes, because it is illegal to make redundancies if a branch is profitable.
No, because directors have absolute discretion and cannot be challenged on business decisions.
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