Directors’ Duties

The Companies Act and statutory duties

All Directors have duties which they must discharge. The general statutory duties which directors must comply with are contained within the Companies Act 2006 (CA 2006). Obviously, the legislation is quite detailed by the main duties can be summarised as follows.

Duty to Act within Powers (section 171 CA 2006)

It’s important that Directors only act within the Company constitution and powers.  Basically, the Company need to authorise the Directors actions. The definition of the powers and restrictions are set out in the memorandum and articles of association.  Some powers and restrictions may derive from decisions of the Company itself or resolutions and agreements affecting the constitution of the company.

The protection of confidential material is a core requirement.  The Duties treat confidentiality as a matter of statutory duty.

Duty to promote the success of the Company (s172 CA 2006)

Directors need to prioritise the interests of the company, its shareholders, and other stakeholders. There is a duty to act in good faith in the best interest of the Company as a whole. If the Business decides to adopt alternative purposes, not just those in the best interests of members, Directors must then act in good faith, in the ways most likely to achieve those alternative purposes.

What does this mean in practice for Directors? Some of this list may be considered as obvious but unless it is defined then individuals could claim ignorance of their duties:

The interests of all employees

Consequences on suppliers, customers, creditors, and others involved with the Company

The impact of the company’s operation on others and the environment in general

The image of the Company and standards of service

Equitable treatment of other Directors

Directors should ensure the business is competitive and operating in an efficient manner.

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Nick Richardson

Nick Richardson

Member Partner
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Brian Shacklady

Brian Shacklady

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Tariq Mubarak

Tariq Mubarak

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Jack Lightburn

Jack Lightburn

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Alice Ryder

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