Steps Four in Starting a Business
Directors Duties
Do you understand the
implications of accepting a
directorship? Directors are
personally liable for actions
or omissions, can be
disqualified from acting as a
Director and can be made
personally liable for the company’s debts.
Did you know that as a director of a limited company,
you have a duty to try to make the company a success,
using your skills, experience and judgment?
Company Directors have responsibilities which include
ensuring that the company trades lawfully and complies
with all legislation and regulation.
Their responsibilities are a series of statutory, common
law and equitable obligations owed by members of the
Board of Directors to the organisation that employs
them.
Statutory and regulatory responsibility varies in
different jurisdictions, but there are a number of
similarities in the framework for directors’ duties.
Directors owe duties to the company , not to
individual shareholders, employees or creditors
except in exceptional circumstances.
Directors’ core duty is to remain loyal to the
company, and avoid conflicts of interest
Directors are expected to display a high standard of
care, skill or diligence
Directors are expected to act in good faith to
promote the success of the corporation
While this system works well in many countries, some
countries have a weaker culture and tradition of
enforcing these values, and a greater cultural tolerance
for conflict-of-interest. Judges may be less likely to
review transactions to decide whether they are fair to
minority shareholders.
As a director of a limited company, you have a duty to
try to make the company a success, using your skills,
experience and judgment. You must also follow the
company’s rules, make decisions for the benefit of the
company, not yourself, and declare to other
shareholders if you personally benefit from a company
transaction or contract.
The board of directors of a company is primarily
responsible for:-
setting the company’s strategic objectives and
policies
monitoring progress towards achieving the objectives
and policies
appointing senior management
Accounting for the company’s activities to owners or
shareholders.
The Chief Executive Officer, or Managing Director if
there is no CEO, is responsible for the performance of
the company, in line with the Board’s overall strategy.
He or she reports to the Chairman or Board of
Directors.
The first directors of a company are appointed at the
time of its registration. Subsequent appointments are
governed by the company’s Articles of Association or
Shareholders Agreements.
On appointment a new director will be asked to provide
certain personal information for registration. They will
normally give notice of any interests in contracts
involving the company and their interest in the
company’s shares.
A newly appointed Director should make themselves
familiar with the company’s Memorandum and Articles
of Association, details of the business e.g. recent
board minutes and management accounts, and the
statutory reports and accounts for at least the past two
years.
The Directors are responsible for the management of
the company within the relevant legal system and the
articles of association. For example, articles of
association may include restrictions on borrowing by
the company.
The directors must act collectively as a board but the
articles usually allow the board to delegate powers to
individual directors as appropriate.
Directors need to be aware that they are personally
subject to statutory duties in their capacity as directors
of a company. In addition the company, as a separate
legal entity, is subject to statutory controls and the
Directors are responsible for ensuring that the company
complies with them.
In the UK the Companies Act 2006 sets out seven
general duties of directors which are:-
to act within powers in accordance with the
company’s constitution and to use those powers only
for the purposes for which they were conferred
to promote the success of the company for the
benefit of its members
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
In the UK these statutory duties are interpreted in
accordance with previous case law which remains
relevant.
In addition to the seven general duties listed above, a
director will be subject to other regulation and
legislation including the Insolvency Act 1986, the
Company Directors’ Disqualification Act 1986, the
Health and Safety at Work Act 1974 and the Corporate
Manslaughter and Corporate Homicide Act 2007.
Directors may be liable to penalties if the company
fails to carry out its statutory duties. If they had
reasonable grounds to believe that a competent person,
such as another director or third party, had been given
the duty to see that the statutory provisions were
complied with, then they may use that as a defence.
Another responsibility of the directors is to ensure that
the company maintains full and accurate accounting
records. A balance sheet and a profit and loss account
for each financial period must be presented to
shareholders and filed with the Registrar of Companies.
Directors are personally liability, both civilly and
criminally, for their actions or omissions, when
directing the company. They can also be disqualified
from acting as a director of a company, and can in
certain circumstances be made personally liable for the
company’s debts.
They also need to ensure Health and Safety at Work is
complied with and can be charged with Corporate
Manslaughter and Corporate Homicide. If a director is
found guilty of these acts or omissions they can be
fined and imprisoned and disqualified.
You can ask other people to manage some of these
things day-to-day. For example, an accountant can
manage your accounts for you – but you’re still legally
responsible for them.
Directors Duties
Do you understand the
implications of accepting a
directorship? Directors are
personally liable for actions
or omissions, can be
disqualified from acting as a
Director and can be made
personally liable for the company’s debts.
Did you know that as a director of a limited company,
you have a duty to try to make the company a success,
using your skills, experience and judgment?
Company Directors have responsibilities which include
ensuring that the company trades lawfully and complies
with all legislation and regulation.
Their responsibilities are a series of statutory, common
law and equitable obligations owed by members of the
Board of Directors to the organisation that employs
them.
Statutory and regulatory responsibility varies in
different jurisdictions, but there are a number of
similarities in the framework for directors’ duties.
Directors owe duties to the company , not to
individual shareholders, employees or creditors
except in exceptional circumstances.
Directors’ core duty is to remain loyal to the
company, and avoid conflicts of interest
Directors are expected to display a high standard of
care, skill or diligence
Directors are expected to act in good faith to
promote the success of the corporation
While this system works well in many countries, some
countries have a weaker culture and tradition of
enforcing these values, and a greater cultural tolerance
for conflict-of-interest. Judges may be less likely to
review transactions to decide whether they are fair to
minority shareholders.
As a director of a limited company, you have a duty to
try to make the company a success, using your skills,
experience and judgment. You must also follow the
company’s rules, make decisions for the benefit of the
company, not yourself, and declare to other
shareholders if you personally benefit from a company
transaction or contract.
The board of directors of a company is primarily
responsible for:-
setting the company’s strategic objectives and
policies
monitoring progress towards achieving the objectives
and policies
appointing senior management
Accounting for the company’s activities to owners or
shareholders.
The Chief Executive Officer, or Managing Director if
there is no CEO, is responsible for the performance of
the company, in line with the Board’s overall strategy.
He or she reports to the Chairman or Board of
Directors.
The first directors of a company are appointed at the
time of its registration. Subsequent appointments are
governed by the company’s Articles of Association or
Shareholders Agreements.
On appointment a new director will be asked to provide
certain personal information for registration. They will
normally give notice of any interests in contracts
involving the company and their interest in the
company’s shares.
A newly appointed Director should make themselves
familiar with the company’s Memorandum and Articles
of Association, details of the business e.g. recent
board minutes and management accounts, and the
statutory reports and accounts for at least the past two
years.
The Directors are responsible for the management of
the company within the relevant legal system and the
articles of association. For example, articles of
association may include restrictions on borrowing by
the company.
The directors must act collectively as a board but the
articles usually allow the board to delegate powers to
individual directors as appropriate.
Directors need to be aware that they are personally
subject to statutory duties in their capacity as directors
of a company. In addition the company, as a separate
legal entity, is subject to statutory controls and the
Directors are responsible for ensuring that the company
complies with them.
In the UK the Companies Act 2006 sets out seven
general duties of directors which are:-
to act within powers in accordance with the
company’s constitution and to use those powers only
for the purposes for which they were conferred
to promote the success of the company for the
benefit of its members
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
In the UK these statutory duties are interpreted in
accordance with previous case law which remains
relevant.
In addition to the seven general duties listed above, a
director will be subject to other regulation and
legislation including the Insolvency Act 1986, the
Company Directors’ Disqualification Act 1986, the
Health and Safety at Work Act 1974 and the Corporate
Manslaughter and Corporate Homicide Act 2007.
Directors may be liable to penalties if the company
fails to carry out its statutory duties. If they had
reasonable grounds to believe that a competent person,
such as another director or third party, had been given
the duty to see that the statutory provisions were
complied with, then they may use that as a defence.
Another responsibility of the directors is to ensure that
the company maintains full and accurate accounting
records. A balance sheet and a profit and loss account
for each financial period must be presented to
shareholders and filed with the Registrar of Companies.
Directors are personally liability, both civilly and
criminally, for their actions or omissions, when
directing the company. They can also be disqualified
from acting as a director of a company, and can in
certain circumstances be made personally liable for the
company’s debts.
They also need to ensure Health and Safety at Work is
complied with and can be charged with Corporate
Manslaughter and Corporate Homicide. If a director is
found guilty of these acts or omissions they can be
fined and imprisoned and disqualified.
You can ask other people to manage some of these
things day-to-day. For example, an accountant can
manage your accounts for you – but you’re still legally
responsible for them.
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