
These “directors’ duties” are wide ranging but there are seven key duties which directors must comply with at all times.
1. Acting within your powers
These “powers” will typically be set out in the company’s articles of association. A copy should be requested from the company or obtained from Companies House and directors should familiarise themselves with the contents.2. Promoting the success of the company
A director must act in a way that he or she considers would be most likely to promote the success of the company for the benefit of its members (or shareholders) as a whole. When making decisions directors should consider (amongst other things):- The likely consequences of that decision in the long term;
- The interests of the company’s employees;
- The need to foster business relationships;
- The impact of the company’s operations on the community and the environment;
- The desirability of the company maintaining a reputation for high standards of business conduct; and
- The need to act fairly between the members of the company.
3. Exercising independent judgment
A director must exercise their powers independently. Directors can still rely on advice, as long as they exercise their own judgment in deciding whether or not to follow that advice.4. Exercising reasonable care, skill and diligence
5. Avoiding conflicts of interest
This applies to direct and indirect interests and to the exploitation of property, information or opportunity, and will continue to apply after a person ceases to be a director in respect of the exploitation of any property, information or opportunity of which they became aware when they were a director. A conflict can be authorised by directors who are genuinely independent.6. Not accepting benefits from third parties
A director must not exploit their position for personal benefit. The members of a company can authorise the acceptance of benefits that would otherwise be a breach of this duty, and the company’s articles of association may contain provisions dealing with this.7. Declaring an interest in a proposed transaction or arrangement
A director must declare to the other directors the nature and extent of any interest (direct or indirect) in any proposed transaction or arrangement with the company, regardless of whether they a party to the transaction or arrangement.Share this story