5/13/2011 Duty to act bona fide in the best interests of the company Re Smith Fawcett Ltd [1942]Ch 304 (Court of Appeal) "there is nothing in principle or in authority to make it impossible to draft such a wide and comprehensive power to directors..." Lord Greene MR:"The principles to be applied in cases where the articles of a company confer a discretion on directors...are,for the present purposes,free from doubt.They must exercise their discretion bona fide in what they consider-not what a court may consider-is in the interest of the co,and not for any collateral purpose." Duty to act bona fide in the best interests of the company Dorchester Finance v Stebbing [1898]BCLC 498 Foster J:"a director must exercise any power vested in him as such,honestly,in good faith and in the interests of the co." What does the term"good faith"refer to here? 25/13/2011 2 3 Duty to act bona fide in the best interests of the company • Re Smith & Fawcett Ltd [1942] Ch 304 (Court of Appeal)  “there is nothing in principle or in authority to make it impossible to draft such a wide and comprehensive power to directors …”  Lord Greene MR: “The principles to be applied in cases where the articles of a company confer a discretion on directors … are, for the present purposes, free from doubt. They must exercise their discretion bona fide in what they consider – not what a court may consider – is in the interest of the co, and not for any collateral purpose.” 4 • Dorchester Finance v Stebbing [1898] BCLC 498  Foster J: “a director must exercise any power vested in him as such, honestly, in good faith and in the interests of the co.” • What does the term “good faith” refer to here? Duty to act bona fide in the best interests of the company