The Duties of a Company Director

Clear and reasonable duties for directors are essential both to safeguard the interests of the subscribers as well as the directors themselves. Consequently, the directors should understand what is required of them, what they are to do and what not to do. Should the directors fail in their duties, the consequences could be serious.

As laid out by the Companies Act 2006, these are the general duties that apply to all directors:

  • A responsibility to function within their powers, as laid out in the company’s Articles of Association, memo and as well as other sources;
  • A responsibility to improve the company’s success;
  • A responsibility to apply independent judgements;
  • A responsibility to apply realistic diligence, skill and care;
  • A responsibility to circumvent clash of interests;
  • A responsibility to reject benefits from any third party;
  • A responsibility to unveil interests in a planned arrangement or transaction.

Directors hold a very important role in UK limited companies, as well as other legal entities. Proper management of a director’s duties helps ensure the success of the company. All company directors are required, by law, to carry out their duties honestly and responsibly and to also ensure that they and the company comply with the law and all relevant regulations that are in place at that time. They must exercise adequate skill and care with proper regard to the interests of the company’s creditors, customers, shareholders, employees and where relevant the public.

Generally, directors may apply all the powers of the company. However, the company’s Articles of Association may set limitations on the powers that the directors have in some areas– a common instance includes a limitation on new shares allocated within the company among others. It is typical of the directors to offer new shares to all the current shareholders prior to inviting applications more widely. 

The specific duties of each director within a company may vary based on the company size, the number of directors, and the nature of the company’s business. The duties, expertise and experience of a director will likewise have an impact on their areas of responsibility and coverage. 

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