The Governance Library curated by Matthew Doyle
Ethics Room · Note 01
Section 171 · Act Within Powers
00:00 / 12:10
mæd partners
Scene 1
Hero
H1: Section 171.
Sub: Act Within Powers.
Scene 2
Frame
Eyebrow: `ETHICS ROOM · NOTE 01 OF 06`
H1: Section 171 · Act Within Powers.
Scene 3
The two limbs (Path-2)
Eyebrow: `THE STATUTE`
Statute card, monospaced, with phrases highlighted olive:
A director of a company must:
(a) act in accordance with the company's constitution; and
(b) only exercise powers for the purposes for which they are conferred.
Citation: Companies Act 2006, s.171.
Scene 4
The room's discipline
Every statute is a moral question in legal clothing.
Read each duty twice.
Once for what the law requires.
Once for what conscience requires.
Scene 5
Authority and purpose
The legislature split them for clarity.
In practice they are a single duty.
You cannot assess limits without knowing what the power was granted for.
Scene 6
Three layers of constitutional architecture (Path-2)
Three rows:
1. Articles of association · the internal constitution.
2. Resolutions · how powers are exercised.
3. External limits · Listing Rules · licence conditions · covenants · Insolvency Act.
Caption: A director who reads only the articles has read half the map.
Scene 7
The argument
Section 171 is the quiet duty.
Section 172 gets the headlines. Section 175 gets the dinner-party stories.
Section 171 fails first, silently, and is usually named last.
Scene 8
Case anchor
H1: Carillion plc.
Sub: Compulsory liquidation · 15 January 2018.
Pill: `CASE STUDY · UK · FTSE 250`
Scene 9
Carillion at scale
Eyebrow: `THE BUSINESS`
Three lines:
43,000 employees across 20 countries.
Tight-margin contracts, long delivery cycles.
Dependent on aggressive bids, accurate forecasts, and cash to carry the work.
Scene 10
The financial trace (Path-2)
Eyebrow: `2009 TO 2017`
Bar chart or stat strip:
£554m · dividends paid.
£317m → ~£990m · pension scheme deficit.
£845m · July 2017 writedown.
15 January 2018 · compulsory liquidation. FTSE 250 constituent until the final months. First UK business of its scale to end in liquidation.
30,000 unpaid suppliers · 19,000 employees.
Scene 11
The Select Committee verdict
Pulled quote, large: "Recklessness, hubris and greed."
Citation: Joint BEIS / W&P Select Committee · HC 769 · May 2018.
Scene 12
The legal reading
Eyebrow: `LEGAL`
Body: Authority under Part 23, s.830. Articles authorised. Board resolved. KPMG signed. In purely formal terms, the duty was satisfied.
Scene 13
The moral reading
Eyebrow: `MORAL`
Body: The realised profits existed only because of accounting treatments the directors knew, or should have known, would not hold.
Authority used on a substantively false foundation is compliance without integrity.
Scene 14
The doctrinal positive
Date plate: 1967.
H2: Hogg v Cramphorn.
Pulled fragment: Even articles-granted power, exercised for a collateral purpose, is void.
Caption: The line has held for sixty years.
Scene 15
The disqualification proceedings
Eyebrow: `THE MODERN ITERATION`
Two lines:
2018 · Insolvency Service investigation.
12 January 2021 · Disqualification proceedings against 8 former Carillion directors.
Scene 16
The closing thought
Section 171 is the duty you will be judged against first if something goes wrong.
It is also the duty you are least likely to be warned about, because it is the one the board assumes.
Scene 17
The closing question
At your next board meeting, before a significant resolution,
ask who can name the constitutional source of the authority you are about to exercise.
If the answer is "the articles" alone, the duty has already thinned.
Scene 18
The wider library
s.171 · do you have authority?
s.172 · for whose benefit?
s.175 · whose interests are in the room?
Scene 19
Credit
Curated by Matthew Doyle · mæd partners.
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Educational material · not legal, regulatory, or investment advice · see `00 - Disclaimers.md` for the full notice · © 2026 mæd partners limited.