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What are the duties of a Company Director?

A company exists and operates through two groups the shareholders (the members) and the board of directors. 

The directors are in charge of the management of the company’s business. They have to make the strategic decisions and are responsible for making sure that the company meets its statutory obligations.

Each individual director is obliged to participate in board meetings to help reach decisions and make sure that the company’s obligations are fulfilled. With those obligations also come various duties which are set out in the Companies Act 2006.

As a Company Director you must:

  • Act within powers. This means that you must act in accordance with the company’s constitution and only use your powers as director for the purposes for which they were given.
  • Promote the success of the company. You must act in the way you consider would be most likely to promote the success of the company for the benefit of all its members.
  • Exercise independent judgement. You must be able to make your own decisions without being influenced. This doesn’t prevent you from acting in accordance to the company’s constitution or any agreements that it has entered.
  • Exercise care, skill and diligence. 
  • Avoid conflicts of interest. It is important to raise any conflicts that may arise during your time as Director.
  • Not accept benefits from third parties. 
  • Declare any interest in proposed or existing transactions or arrangements with the company. If you are interested in any transaction or arrangement with the company you must declare it to the other directors. In the case of a proposed transaction, you must do this before it is entered into. In the case of an existing transaction you must do this as soon as reasonably practical.

The duties of a director are owed to the company and not any other group company or shareholder. The company itself can take action against any director if there has been a breach of duty.

If you are found to have breached your duties you could face an injunction restricting you from doing or not doing an activity or preventing you from being a Director in the future, and/or be forced to pay damages or compensation. In some circumstances, failure to disclose an interest in an existing transaction carries the risk of a criminal fine.

If you would like advice on the financial and legal implications of becoming a Director of a Limited Company our expert team of Business Law Solicitors at Slater and Gordon can help.

Call us on freephone 0800 916 9052 or contact us online and we will call you.

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