Directors’ duties – a brief reminder
Our company commercial partner Paul Symes-Thompson reminds directors of their responsibilities through this Q&A.
I am the sole director and shareholder of my company. Surely the only duty I owe as a director is to myself?
No. All directors are personally subject to statutory duties as set out in the Companies Act 2006. These duties are owed to the company itself and can also extend to shareholders, creditors and employees. In addition, all directors are responsible for ensuring that the company complies with its statutory obligations.
What are the main duties?
The main duties are to:
- promote the success of the company for the benefit of its shareholders;
- exercise independent judgement;
- avoid any conflict of interest;
- exercise reasonable care, skill and diligence;
- not accept benefits from third parties;
- act in accordance with the company’s constitution; and
- declare an interest in a proposed transaction or arrangement.
Is that all?
No. A number of common law (non-statutory) duties also still apply. These include a duty to not misapply company property, a duty of confidentiality and a duty not to cause the company to exceed its powers.
What if I get it wrong or don’t declare an interest?
Directors may incur personal liability, both civil and criminal, for their acts or omissions. Under the Insolvency Act 1986 it is possible for a director to be made liable for the company’s debts. Criminal offences for directors have been created under several statutes (including corporate manslaughter) and in some circumstances a director can be disqualified from acting as a director in the future. It is therefore very important to take advice if you are in any doubt about your duties in any particular situation.