Partner Article

7 golden rules for directors

Directors need to be made aware that they are personally subject to certain duties in their capacity as directors of a limited company.

Historically, the duties owed by directors to their companies have evolved through case law. The Companies Act 2006 codified these and introduced a statutory statement of directors’ duties which aimed to replace many of those existing common law duties and enshrine them in law.

It is also worth noting that the law does not distinguish between executive and non-executive directors, so such duties apply to both categories of directors.

Essentially, there are 7 duties that directors should have in their minds at all times:

1. To promote the success of the company
2. To act within powers of the company’s constitution
3. To exercise independent judgment
4. To exercise reasonable care, skill and diligence
5. To avoid conflicts of interest
6. To not to accept benefits from third parties
7. To declare an interest in a proposed transaction or arrangement with the company

Broadly speaking it is hoped that by setting out these duties in statute it brings greater clarity and certainty to directors duties, ensures that the company’s interests should always come first and that directors, when making decisions, should always have these duties at the fore front of their minds.

Article written by Fiona Gibbon, partner in The Endeavour Partnership, a member law firm of UK200Group.

This was posted in Bdaily's Members' News section by UK200Group .