What are director’s legal duties ?
Most of what follows comes down to common sense, but there are occasions when situations are complicated and whether commercial legal advice is worth seeking. Here are some of the main legal requirements on directors :-
A duty to act within the company’s powers – the first port of call should always be to checkand recheck the company’s Articles of Association.
A duty to promote the success of the company – this is a good faith obligation based on a number of criteria under company law (see below) which should always be considered and we would always recommend recording the decision making:
- likely consequences long term;
- interests of company’s employees;
- fostering good business relationships with suppliers, customers and others;
- impact of the company’s operations on the community and the environment;
- desirability of the company maintaining a reputation for high standards of business conduct; and
- need to act fairly as regards the shareholders.
Whilst in no way diminishing the other factors above, we have deliberately highlighted 2 of the factors above, which we consider to be absolutely fundamental and paramount director duties.
Other very important primary duties must always include the following :-
- exercise independent judgment
- reasonable care, skill and diligence – but note that the standard required will vary, for example according to specific role, experience and qualifications such that a higher legal obligation is likely for a financial director on any financial issues
- avoid conflicts of interest – a director must avoid any situation where he has or could have a conflict or possible conflict of his interests with those of the company. He cannot exploit any property, information or opportunity that comes his way because of company activity.
- not to accept benefits from third parties – this prevents taking bribes but may also include benefits from being a director, shareholder, employee or advisor to a competing company.
- to declare interests in a proposed transaction or arrangement
Whilst not strictly included in the newest version of the Companies Act which for the first time in corporate law includes some specific provision about directors duties, as above, a director should always take great care and probably commercial legal advice in conjunction with the board, if there is any suggestion of corporate insolvency, as there are clear the duties to the company’s creditors when a company becomes technically insolvent and the duty to put a company into liquidation if an insolvent liquidation cannot reasonably be averted.
How many times have you purchased something without reading the terms and conditions ? The reality is that most people almost never read at the small print. However, the terms and conditions are extremely important and are required in order to protect you and your business. The consumer has various levels of protection. This includes the Consumer Credit Act 1974, Data Protection Act 1998 and The Consumer Protection (Distance Selling) Regulations 2000. All you have are your business terms and conditions.
