What are my responsibilities as a Company Director ?
Directors Duties
Directors’ duties have now been written into law so let us review the position and those duties.
Firstly, directors are appointed by the shareholders, i.e. by the owners of a Company, to look after that company on their behalf.
Directors and shareholders may be the same people, but they have different roles and responsibilities.
A director is the face of the company and seen to be acting on its behalf. So directors should be trusted individuals.
The 7 Official Directors Duties
- To act within the powers conveyed by the articles and use those powers only for
proper purposes
- To promote the success of the Company, for the benefit of members
- To exercise independent judgement
- To exercise reasonable skill, care, and diligence
- To avoid conflict of interest
- Not accept benefits from third parties, by reason of office
- To declare transactional interest
These duties are owed personally, by Directors, to the company. You may not think this is a problem for a small company which you own but it can cause problems if there is ever a change of control or insolvency.
Duties include the responsibility to make sure statutory documents are filed at Companies House – with fines of up to £5,000 for non compliance.
Directors may also be disqualified if they do not fulfil their duties and responsibilities.
Corporate responsibility
A director is responsible for everything that happens in the company, so they need to protect themselves personally – often with Directors and Officers insurance.
This can include what staff members do, and recent cases have shown the need for Directors to ensure there are company policies and staff training on things like
- Fraud prevention
- Anti bribery
- Health & safety
- Whistleblowing
- Data protection
- Privacy polices
- Social media
- Equality and diversity
- Harassment
- Grievances & disciplinary
- Holidays, absence recording and sickness
- Anti-money laundering etc.
Conflict & Benefit
A director is deemed to be an employee but is exempt from some employment regulations such as
- The need to have an employment contract
- Minimum wage regulations
- Autoenrollment regulations
A director is entitled to remuneration, approved by shareholders, for their work.
A loan to a director could be said to be a misuse of company funds, for personal benefit. This conflict can be released by such a loan being approved by shareholders – loans of up to £10,000 may be approved after the event but large loans must be approved beforehand.
A directors personal or familial involvement in any company transaction, or proposed transaction, should be declared to the company, and noted in the minutes as approved by
- a board of independent directors (if the company has 2006 articles) or
- the shareholders,
in order to officially release the possible conflict – otherwise the courts can, at any time, unravel the transaction and award any profits or damages back to the company.
Examples of possible conflicts requiring such release: –
- Employing family members
- Loans to directors or their family
- Using or transferring assets
- Subcontract work.
One Director Company Anomaly
Recent cases have overruled generally accepted practise as regards Model Articles in use since 2008 which variously state
7(2) – A company can have any number of directors but at least one
11 – A quorum for making board decisions is two directors, unless otherwise stated
Practice had been to assume one director is quorum if there is only one director.
It maybe a good idea to check your articles and either appoint a second director or change the articles if necessary, so that valid board decisions can be made, including ratifying previous decisions if required.
