Everys latest: Do you know your duty as a company director?

Steve Carman

Steve Carman

First published in Business, sponsored by AC Mole and Everys

All you need to know about your duties as a company director, by Steve Carman, consultant solicitor at Everys.

EVERYS is seeing an increase in enquiries from company directors, particularly from start-up companies, in an attempt to further understand the duties the role of a director carries.

Directors are responsible for carrying on the business of the company and exercising its powers.

Your primary responsibility is to the company (that is, its members), but you also have obligations to your fellow directors, the employees and any creditors of the company.

The codification of directors’ duties in the Companies Act 2006 should not be seen as a ‘box ticking’ exercise to be undertaken as a pre-cursor to the decision-making process of a director.

There is an emphasis on ‘proper consideration’ of the duties as they pertain to you and the interests of the company.

A director who gives ‘proper consideration’ to the statutory measures will not be in breach of the duty to have regard to them.

A director who pays lip service to the list of matters, but gives no ‘proper consideration’ to them, will be in breach of duty and may be liable to sanctions and penalties, or even disqualification.

With this in mind it is important that the board fosters an ethos of enquiry and consideration both at board meetings and as individuals concerned in the day to day management of the company.

In summary the codified duties are:

  • Duty to promote duty to promote the success of the company
  • Duty to act within your powers
  • Duty to exercise independent judgement
  • Duty to exercise reasonable care, skill and diligence
  • Duty to avoid conflicts of interest
  • Duty not to accept benefits from third parties
  • Duty to declare any interest in proposed or existing transactions or arrangements with the company

In practice you should familiarise yourself with the following:

  • Sections 172-177 of the Companies Act 2006
  • Memorandum and articles of association of the company in particular any limitations on the powers of the company or the directors.

In addition, ensure:

That the company’s management, those employees responsible for preparing board papers and presentations, and others involved in governance are also aware of the duties of directors, in particular the duty to promote the success of the company (above);

That board minutes and similar documents refer to their duty to promote the success of the company and, where relevant, the listed factors.

You need not spend a disproportionate amount of time and money complying with your statutory duties, and it is not necessary to prepare a checklist of duties or matters to which you must have regard prior to each board meeting or prior to making any decision.

If you have any further questions with regard to directorships contact Steve Carman on 07980-045982 or email steven.carman@everys.co.uk

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