These notes are intended to give a summary of the duties and responsibilities which a person has as a result of position as a Director of a UK Limited Company.
Directors are responsible for carrying on the business of the company and exercising its powers. Their primary responsibility is to the company (that is, its shareholders), but they also have obligations to their fellow directors, the employees and any creditors of the company.
Directors’ duties include:
A duty to promote the success of the company.
Directors must act in the way that they consider, in good faith, is most likely to promote the success of the company for the benefit of its shareholders as a whole.
A duty to act within your powers.
Directors must act in accordance with the company’s constitution and must only exercise their powers for their proper purpose.
A duty to exercise independent judgement.
This duty does not prevent directors relying on advice, as long as they exercise their own judgement in deciding whether to follow the advice.
A duty to exercise reasonable care, skill and diligence.
A duty to avoid conflicts of interest.
In certain circumstances, a conflict of interest may be authorised by the other shareholders or the board, if they have no interest in the relevant transaction.
A duty not to accept benefits from third parties.
Duties to declare any interest in proposed or existing transactions or arrangements with the company.
Directors who have any doubts as to whether or not they should declare an interest should declare it, or seek professional advice.
A duty of confidentiality.
This common law duty overlaps with the duties on directors to promote the success of the company, to avoid conflicts of interest and not to exploit their position for personal benefit.
Duties that arise in an insolvency situation.
There are a number of duties that arise when the company is in an insolvency situation. Directors in this situation should therefore take professional advice.
Duty to inform.
Directors have a duty to Companies House (through the Company Secretary) of:-
- Any change in the home address of a Director
- Any change in the name of a Director
- Any change in the Person or Persons with Significant Control (PSC) over the company. In short, a PSC is a person who ultimately controls 25% or more of the company or its ultimate mother company.
This advice is only intended to highlight the key duties and responsibilities that the Directors have as a result of holding their role within the UK company. They should always take advice on any specific matters of concern.