Directors Duties

Are you a director?

There is a statutory definition of "director" but it is not that helpful in that a director can include any person occupying the position of a director, whatever the position is called.

Of course, if you're been appointed a director, that's the end of the matter.

However, you can fall within the definition and be a "de facto" director if you are sufficiently engaged in the day to day management of the company's business and acting as one or you could be a shadow director if the other directors accept and implement your instructions and decisions although you may not carry out these yourself.

Directors' Duties

Generally, as well as your duties under your employment agreement, you also have duties as a director of the company. There are high behavioural standards to maintain and you must put the company's interests before your own. Here's a brief outline.

Duties to whom?

Generally, directors owe their duties to the company and it is generally the company which enforces them, although in some cases a shareholder may be able to bring a derivative claim on behalf of the company.

What are your duties as a director?

These are set out in the general law, the constitution of the company and legislation. Some of them are below:

  • acting within the constitution of the company, i.e. its articles
  • enlightened shareholder value not only must you promote the success of the company in the interests of all its shareholders but also take into account a wider group of stakeholder interests including the employees, customers, suppliers, the community and the environment
  • exercising independent judgement
  • exercising reasonable care, skill and diligence as exercised by a reasonably diligent person with both your own knowledge, skill and experience
  • avoiding conflicts of interest (but this can be dealt with by the articles in a private company)
  • not accepting benefits from third parties
  • declaring your interest in a proposed or existing transaction or arrangement with the company
  • only approving the company's accounts when satisfied that they give a true and fair view of the assets, liabilities, financial position and profit or loss of the company
  • sending in the annual return and filing other documents at Companies House

What if there is a breach?

You may be personally liable to account for any profit you have made or benefit received or to pay the company compensation for any loss it has suffered as a result.

You may also have to give back any property that has been misappropriated.

Some of the duties carry criminal responsibility and depending, you could face a fine, imprisonment or disqualification.

If there are board issues or if you think that there may be a problem contact Roberta