Directors’ Duties

Many business people make the mistake of assuming that “my business” = “me” and think that their company can be treated as a personal piggy-bank. That has not been the case for well over 150 years and there has long been legislation and case law to ensure that directors act in the best interests of shareholders and creditors, that they do not make secret profits, that they do not compete with the company and that they do not trade when there is no real prospect of avoiding insolvency. A failure to abide by the law can result in personal civil liability for the directors and, in some instances can constitute a criminal offence.

The Companies Act 2006 codified the duty of directors although much of the previous case law remains relevant. The seven key duties of a director are:

  • To act within powers.
  • To promote the success of the company.
  • To exercise independent judgment.
  • To exercise reasonable care, skill and diligence.
  • To avoid conflicts of interest.
  • Not to accept benefits from third parties.
  • To declare an interest in a proposed transaction or arrangement.

If you have any doubts as to whether you, or other members of your Board, are complying with those duties, we would be happy to advise you.