It is a requirement of the Companies Act 2006 (the Act) that every company has at least one director. Whether you become a director through incorporating your own company or you are promoted through the life time of your employment, all directors are subject to the same rules laid down in the Act (The Articles of Association of a company may change some aspects of your role as a director, discussed below).
General Duties
As a director you have to ensure that you act in line with the duties set out in Chapter 2, Part 10 of the Act which includes the duty:
• to act within your powers;
• to promote the success of the company;
• to exercise independent judgment;
• to exercise reasonable care, skill and diligence;
• to avoid conflicts of interest;
• not to accept benefits from third parties;
• to declare an interest in a proposed transaction or arrangement.
Whilst the Act has codified much of the old fiduciary duties, directors must be aware that some previous common law duties are still in force including the duty to act in good faith and with loyalty to the company.
Duties and Requirements at Board Meetings
Any director may convene and conduct a board meeting as long as they have followed the requirements laid down in the Act and or the Articles. These include the requirement to:
• serve written notice of the meeting to all directors of the company and stating the date, time and place of the meeting;
• inform the directors of the business to be considered;
• giving the correct notice period for the meeting;
• ensure the requirements of quorum are met at the meeting (minimum number of directors).
When a director makes a decision at a board meeting they must consider section 172 of the Act. Section 172 requires directors to consider the impact of their decision on various parties including employees and how the decision will affect the local environment. There are several key things to consider when making a decision at a board meeting including:
• the likely consequences of any decision in the long term;
• the interests of the company’s employees;
• the need to foster the company’s business relationships with suppliers;
• customers and others;
• 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;
• the need to act fairly as between the members of the company.
Directors are heavily regulated by the Act and the remaining fiduciary duties. In addition to these requirements the shareholders may have imposed further obligations on the directors in the Articles of Association (the Articles). Common obligations found in the Articles include the requirement to allow shareholders to vote on key issues (rather than directors) and minimum requirements for quorum of board meetings.
When you become a director it is advisable to read through the company’s Articles and Memorandum of Association (these documents are the company’s constitution) to ensure that you comply with any additional requirements found in these documents.
For more information on your duties as a company director please click here.
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