The Envision Partnership Blog

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So What Are My Responsibilities as a Director?

The statutory responsibilities of a director have been referred to a great deal in the last few weeks in relation to the Coronovirus Job Retention Scheme. A furloughed company director is not allowed to carry out the usual work they undertake for the company but they can continue to perform their statutory duties.

A director has to perform a set of 7 duties under the Companies Act 2006. 

So what are they?

Company’s constitution

A director must follow the company’s constitution and its articles of association. These are written rules about running the company, which have been agreed by the members, directors and company secretary.

The constitution sets out the powers granted to a director and the purpose of those powers.

Promote the success of the company

A director must act in the company’s best interests to promote its success. Giving consideration to the following:

  • consequences of decisions, including the long term
  • interests of its employees
  • need to support business relationships with suppliers, customers and others
  • impact of its operations on the community and environment
  • company’s reputation for high standards of business conduct
  • need to act fairly to all members of the company

If the company becomes insolvent, a directors responsibilities will apply towards the creditors, instead of the company. A creditor is anyone owed money by the company.

Independent judgement

A director must not allow other people to control their powers as a director. They can accept advice, but must use their own independent judgement to make final decisions.

Exercise reasonable care, skill and diligence

A director must perform to the best of their ability. The more qualified or experienced they are, the greater the standard expected of them.

Avoid conflicts of interest

A director must avoid situations where their loyalties might be divided. They should consider the positions and interests of their family, to avoid possible conflicts.

They should tell other directors and members about any possible conflict of interest, and follow any process set out in the company’s articles of association.

This duty continues to apply if they are no longer a director. They must not take advantage of any property, information or opportunity they became aware of as a director.

Third party benefits

A director must not accept benefits from a third party that are offered because of their position. This could cause a conflict of interest.

The company may allow a director to accept benefits like reasonable corporate hospitality, if it’s clear there’s no conflict of interest.

Interests in a transaction

Directors must tell the other directors and members if they might personally benefit from a transaction the company makes. For example, if the company plans to enter a contract with a business owned by a member of their family.