What are my responsibilities as a director under the Companies Act 2006 ?

A director of a company manages and is responsible for the day to day running of a company.  If you are also an employee and/or shareholder you will have additional obligations – however this blog post just looks at your duties as a director.

As a director of a company, you have specific obligations under the Companies Act that you must comply with.  These are known as ‘directors’ duties’ and are specific to directors. 

The 7 directors duties are:

• To act within the powers conferred by the company’s constitution, contained in the articles of association.
• Promote the success of the company
• Exercise independent judgment
• Exercise reasonable care, skill and diligence
• Avoid conflicts of interest
• Not accept benefits from third parties
• Declare any interests in proposed or existing transactions or arrangements with the company

The various duties are wide ranging in nature and are applicable to all acts that a director is likely to undertake in his or her role.  Therefore, it is really important that a director has deep understanding of the company’s business so as to comply with all of the duties.  It is worth pointing out that all the duties are equal and therefore you must comply with them all and at all times.

What happens if I breach a duty?

Generally speaking, only the company can bring a claim for a breach of a duty. However, on occasions a shareholder may be able to make a claim on behalf of the company or, if a company is insolvent, then a liquidator could possibly bring a claim on behalf of the company. 

If a claim is brought, depending on the nature of the claim damages could be sought by the company and a director could possibly be disqualified for up to 15 years following investigation.

How can we help?

If you are a director of a company and need advice regarding your obligations as a director, please get in touch and we can provide you with assistance.  Alternatively, if you are a shareholder in a company and you believe a director is acting in a way which breaches one or more of their duties, we are also able to provide legal and practical advice.