General Duties of Directors (Companies Act 2006)
1. Act Within The Powers Given By The Company’s Constitution
A director of a company must act in accordance with the company’s constitution and only exercise powers for the purposes for which they are conferred.
A company’s constitution is its articles of association.
2. Promote The Success of The Company
The directors should make decisions which are in the best interests of the company. They should also consider the impact of those decisions on shareholders, customers, employees, suppliers and the environment.
3. Avoid or Declare Conflicts of Interest
A director must avoid a situation in which he/she has, or could have, a direct or indirect interest that conflicts, or may possibly conflict, with the interests of the company.
4. Exercise Independent Judgement
A director may seek professional advice as long as he/she exercises their own judgment in deciding how to proceed based on that advice.
5. Act With Reasonable Skill and Care
Directors should act in a way a reasonably diligent person would behave based on their general knowledge, skill and experience.
6. Avoid Accepting Gifts from Third Parties
A director must not accept a benefit from a third party given by reason of his/her being a director or by his/her doing anything as a director.
7. Declare Interests In A Proposed or Existing Business Arrangement
7. Declare Interests In A Proposed or Existing Business Arrangement
7. Declare Interests In A Proposed or Existing Business Arrangement
If a director is in any way, directly or indirectly, interested in a proposed transaction or arrangement with the company then he/she must declare both the nature and extent of this interest to the other directors before the company enters into the transaction or arrangement.
Other Duties Imposed On Directors By Law
Maintaining Proper Accounting Records
Directors must keep adequate and accurate company accounting records. The records must show and explain transactions and disclose the company’s financial position with reasonable accuracy. As a minimum, accounting records must contain day to day entries of all sums of money received and expended by the company as well as a record of the assets and liabilities of the company.
Failure to keep proper accounting records is a criminal offense punishable by imprisonment or a fine. For persistent failure a director may be disqualified
Maintaining Statutory Registers
Every company is required to keep certain statutory registers and to provide access to them. These must be kept at the company’s registered office or at some other place notified to Companies House.
These registers include:
- register of members; register of directors;
- register of directors’ residential addresses (not open to public inspection); register of secretaries;
- register of persons with significant control (PSC register); copies of all charges and mortgages; and
- copies of directors’ service contracts.
Failure to maintain the records or submit a return within the required timescales will result in the directors being liable to a fine.
Maintaining Compliance With Data Protection Legislation
Data protection legislation sets out how personal data must be handled and relates to the collection, recording, use, storage, disclosure and destruction of personal data held by the company. Companies must be able to provide evidence that the legislation has been complied with.
Directors could potentially face personal liability of a criminal nature should anybody within the company commit a breach of the legislation.
Maintaining Compliance With Health & Safety Regulations In The Workplace
Directors owe duties to their employees and to persons not in their employment but who may be affected by their undertaking (such as contractors, visitors to their site, etc). These duties stem from the Health and Safety at Work Act and related legislation.
Where an offense under any health and safety legislation is committed by a company and it is considered to have been attributable to the neglect of any director of the company, that person, as well as the company, will face proceedings for breach of the relevant health and safety legislation.
If convicted, penalties range from a fine to imprisonment for up to two years and disqualification from acting in the capacity of a director for up to 15 years.
Prevention of Facilitation of Tax Evasion
A director must ensure that the company has reasonable prevention procedures in place in order to prevent the facilitation of tax evasion.
Prevention of Bribery
The Bribery Act imposes various obligations on a company and its directors.
Companies could face an unlimited fine and individuals could face an unlimited fine as well as a maximum prison sentence of 10 years. Directors should conduct regular risk assessments and ensure that adequate procedures are in place to prevent bribery.
Obligations to file information at Companies House
Obligations to file information at Companies House
Obligations to file information at Companies House
All companies have an obligation to file documents and updates with Companies House at certain intervals.
These are usually annual filings or a filing that is required as a result of a particular event or change to the company. It is the responsibility of the company’s directors to know when these filings are required and to ensure that these filings occur on time.
A director can be fined, prosecuted or disqualified if he/she does not meet his/her responsibilities.
If annual filings are not made then Companies House may assume that the company is no longer carrying on business or is no longer in operation. This may result in steps being taken to strike the company off the register. The effect of this is that the company is deemed to no longer exist and all assets become property of the Crown.
