A director’s duty of loyalty and the relevance of the company’s scope of business: Cheng Wai Tao v Poon Ka Man Jason

• Main Author: KOH, Pearlie M. C.
• Format: text
• Language: English
• Published: Institutional Knowledge at Singapore Management University 2017
• Subjects: Directors’ duties; Hong Kong; No-conflict and no-profit rules; Scope of business; Business Law, Public Responsibility, and Ethics; Commercial Law
• Online Access: https://ink.library.smu.edu.sg/sol_research/2301; https://ink.library.smu.edu.sg/context/sol_research/article/4253/viewcontent/Koh_2017_The_Modern_Law_Review__1_.pdf
• Institution: Singapore Management University

The Hong Kong Court of Final Appeal has utilised a ‘scope of business’ inquiry to delineate the boundaries of the no-conflict rule for the company director. Such an inquiry is directed at discerning the realistic ability of the company to exploit any particular business opportunity and a strict capacity approach is eschewed, at least where the no-conflict rule is concerned. The decision is premised on a bifurcation between the no-conflict and no-profit rules, suggesting that the tests to determine breach of these fiduciary rules are not necessarily the same, thus permitting a more nuanced consideration of directorial breaches.