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What are the responsibilities of a company director?

No matter whether you are a seasoned director of many companies or just starting out on your director journey, you need to be aware of your roles and responsibilities. Companies Act 2006 outlines 7 duties you must perform as a director:

1. Promote the success of the company - admittedly, this seems quite obvious and hopefully most Directors will have their company success at heart and you must consider:

  • The consequences of your business decisions

  • The long term interests of your employees

  • Supporting business relationships with suppliers, customers and other stakeholders

  • Addressing the impact of your business and operations on the community and environment

  • Your reputation for high standards of business conduct

  • The need to act fairly to all members of the company

If the company becomes insolvent, your responsibilities as director will apply towards anyone the business owes money to (creditors), instead of the company.

2. Independent judgement

You can accept advice from third parties but you should use your own independent judgement to make final decisions and must not allow other people to control your powers as a director.

3. Exercise reasonable care, skill and diligence

Being a Director, you must perform to the best of your ability and you must use any relevant knowledge, skill or experience you have . The more qualified or experienced you are, the greater the standard expected of you.

4. Avoid conflicts of interest

To avoid conflicts of interest you must avoid situations where your loyalties might be divided. You should consider the positions and interests of your family and act accordingly.

Along with your best judgement, you should tell other directors and members about any possible conflict of interest, and also follow any processes set out in the company’s articles of association.

5. Third party benefits

In order to avoid any conflict of interest, you must not accept benefits from a third party that are offered to you because you’re a director. However, the company may allow you to accept benefits like reasonable corporate hospitality, if it’s clear there’s no conflict of interest.

6. Interests in a transaction

You must tell the other directors and members if you might personally benefit from a transaction the company makes. For example, if the company plans to enter a contract with a business owned by a member of your family.

7. Company’s constitution

Do you know your company’s constitution and its articles of association? These are written rules about running the company, agreed by the members, directors and the company secretary. The constitution sets out what powers you’re granted as a director, and the purpose of those powers.

Keeping records and other duties

Do you have board meetings? Most companies do and as a director, your legal duty is to provide a record of any decisions and board meeting minutes and they must be kept for 10 years.

Finally, you must follow the company’s constitution and its articles of association. These are written rules about running the company, agreed by the members, directors and the company secretary.

All of these duties apply even if you’re no longer a director. You must not take advantage of any property, information or opportunity you became aware of as a director and all of the above applies even if:

  • You’re not active in your role as director

  • Someone else tells you what to do

  • You act as a director but have not been formally appointed

  • You control a board of directors without being on it

If you need more help you can watch ‘Being a company director’

Video From Youtube - Companies House - covering the duties of a director & what responsibilities a director has to Companies House

Need more information:

Being a director can be quite daunting with all the responsibilities you will have to deal with, if you need help with any of these tasks, drop me an email or book a call to discuss:

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