DON’T GET CAUGHT IN THE (Companies) ACT!
The Companies Act 2006 is now fully in force, and sets out some complex legal duties for company directors. Failure to comply with these duties can mean a director is personally liable to creditors and shareholders.
Although this sounds scary, awareness of your duties under the Act should help you to avoid penalty. As specialist business solicitors, Lawson-West have put together a comprehensive briefing note, to help company directors do just that. The main duties are summarised below or you can access the complete document via our website here. This includes information on the scope of the duties, consequences of breach, relief from liability, indemnity and insurance, as well as some practical steps you can follow to avoid getting caught out.
General Duties of Directors under the Companies Act 2006
Duty to promote the success of the company
A director must act in the way he considers, in good faith, would be most likely to promote the success of the company for the benefit of its members as a whole.
Duty to act within powers
A director must act in accordance with the company's constitution and must only exercise his powers for their proper purpose.
Duty to exercise independent judgment
A director must exercise independent judgment, including when deciding to take advice from a third party.
Duty to exercise reasonable care, skill and diligence
A director must exercise the care, skill and diligence which would be exercised by a reasonably diligent person with (at least) the general knowledge, skill and experience that may reasonably be expected of a person carrying out the functions carried out by the director in relation to the company.
Duty to avoid conflicts of interest
A director must avoid situations in which he has or can have a direct or indirect interest that conflicts with, or may conflict with, the company's interests.
Duty not to accept benefits from third parties
A director must not accept any benefit (including a bribe) from a third party which is conferred because of his being a director or his doing or not doing anything as a director.
Duty to declare interest in proposed transaction or arrangement with the company
A director must declare any personal interest to the other directors the nature and extent of any interest, direct or indirect, in a proposed transaction or arrangement with the company.
For more information, please contact David Heys at Lawson-West Solicitors on Leicester 01162 029 854.