The central argument in this chapter is that the duties to which directors owe the company, specifically the duty to act in good faith in the best interests of the company and the duty to exercise powers for proper purposes, should be aligned with the purpose of social enterprises. In other words, the meaning of company’s interests in the best interest duty and that of proper purpose in the proper purpose rule ought to be equated with the proposed corporate purpose advanced in Chapter 1. To make this argument, I show that the laws governing these two directors’ duties in the four common law Asian jurisdictions and those of UK CICs and US PBCs and SPCs are not aligned with the purpose of social enterprises and I demonstrate why it is important to have this alignment. I also explain how the proper purpose rule can be aligned with my proposed purpose of social enterprise.

Directors’ duties can be classified into two themes: duties in relation to care and skill, and duties in relation to loyalty and good faith. Chapter 10 provided an overview of the duties as a whole, and Chapter 11 provided the history and current law in relation to the duties of care and skill. This chapter is the first of two chapters addressing the duties of loyalty and good faith. These duties fall into two categories: those concerned with the way in which directors exercise the powers and discretions vested in them, and those concerned with the standard of conduct expected from directors.