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as their executive colleagues.
It was pointed out that the provisions
of Section 15 of the 1985 Act (now Section 214 of the 1986 Act) were
very vague; in particular, the provision in Section 15(2)(a) that the
wrongful trading provisions apply to a director who knew "or ought
to have concluded" that there was no reasonable prospect that the
company would avoid going into insolvent liquidation. The consequences
of being found responsible for wrongful trading were very serious indeed
and this section could be applied even to non-executive directors who
took no part in the day-to-day management of a company.
12.2
It was suggested that the legislative approach to directors
in Britain and Hong Kong was wrong. The legislation was directed
towards imposing ever-stricter obligations on directors and imposing
severe penalties for default in compliance with them. This approach
failed to recognise the need for distinguishing between executive and
non-executive directors. It had been shown in Europe in particular,
where non-executive directors are very common, that they perform
an important function. However few people would be willing to act
as non-executive directors if they knew that by so doing they might,
for example, make themselves liable for a company's ordinary trading
losses. The correct approach would be to provide for the two classes
of directors, executive and non-executive, in companies legislation
generally and then confer appropriate powers and impose appropriate duties,
with appropriate penalties for failing to fulfil these duties.
12.3
The opposing view was that the introduction of a sort of
"director (2nd class)" with different powers, responsibilities and
obligations from "directors (1st class)" would tend to devalue or
debase the status and credibility of directors generally. The
majority of directors are directors in the real sense, i.e. they
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