Directors Duties

Get it right!

As the director of a company, you may be aware that you carry significant responsibilities to the company, and the general public. Despite this many directors are not fully aware of what is expected of them.

Whilst some directors’ duties are apparent, there are some which are not as obvious. All directors need to be wary of the traps and pitfalls of their office.

General duties of a director.

A director owes certain duties to the company as specified under the Companies Act 2006. There are seven general duties owed by directors:

  1. To act within his or her powers;
  2. To promote the success of the company;
  3. To exercise independent judgment;tick
  4. To exercise reasonable care, skill and diligence;
  5. To avoid conflicts of interest;
  6. Not to accept benefits from third parties; and
  7. To declare all interests in a proposed transaction or arrangement.

As well as the duties contained in the Act, directors also have further duties which fall under older statutory requirements, including the duty to keep proper books.

Most important of all is the duty to manage the company’s financial affairs and keeping the company solvent. As a director, you are duty bound to always consider and act in the best interest of the company and its creditors.

Criminal and financial penalties.

A failure to comply with your statutory duties as a director can be a criminal offence with serious consequences. Not only will you face criminal sanctions, the company will be able to sue you for damages. As you owe the duties to the company, it is only the company that is able to enforce those duties.  It is only in very limited circumstances that shareholders will be able to bring an action i.e. if an insolvency occurring. Furthermore, directors who breach their duties are at risk of being disqualified for a set period of time.

Undoubtedly, becoming a director of a company does have its benefits, however undertaking such a position should not be considered lightly or unadvisedly. If you are thinking of setting up your own business or are invited to become a director, it is vital that you gain detailed knowledge and understand what is expected of you.

Freeman Jones are commercial solicitors and can advise you of your duties and responsibilities as a director.

One of our business solicitors can offer business directors of all experiences, professional advice on how to manage your role as a director and ensure that you do not face personal liability.

To discuss any of the above matters or for any other commercial law issues that you may wish to discuss why not book a FREE 30 minute no obligation appointment with us.

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