5 Things a UK company director needs to do

When you form a limited company or partnership in the UK, you have a number of legal obligations to think about.

The Companies Act 2006 stipulates the duties of a UK company director. Several duties dictate what company directors of UK companies are supposed to do.

Duties of a company director in the UK

Some of the main legal responsibilities of company directors in the United Kingdom include;

1 Acting within powers

Directors are expected to use their powers as per the company’s constitution (articles of association) and the purpose the powers were intended for. Articles of association clearly define directors’ responsibilities among other important matters such as shareholder control.

2. Helping the company succeed

Directors are also legally obliged to help their company succeed through acts of good faith. They are responsible for assessing the long-term consequences of decisions before they make them, considering the interests of employees and other stakeholders when executing their mandate, fostering good relations with customers, suppliers, and others, safeguarding/boosting the reputation of their company, and engaging in other activities that improve a company’s probability of success.

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3. Acting independently, reasonably, skilfully, with care and diligence

Company directors in the UK should also exercise independence in every way when making judgments about varying matters. This legal responsibility is authorised by a company’s constitution.

Directors must also be skilful, diligent, and careful when discharging their duties. They have a duty to be knowledgeable, skilled, and experienced when discharging their functions as directors.

4. Avoiding conflict of interest

The duties of a company director also involve avoiding situations or dealings that can potentially or directly put them at conflict with the company’s interests. This legal responsibility covers a wide range of potentially conflicting interests/situations such as exploiting property, insider information, or opportunities for personal gain whether or not the company can take advantage of the information, property, or opportunity in question.

It’s worth noting that the duty of a director to avoid conflict interest isn’t infringed if the situation can’t be reasonably regarded as likely to result in a conflict of interest or when there is authorisation from directors. Authorisation can be granted by directors if a company (public or private) has constitutional provisions that don’t invalidate such authorisation or provisions enabling directors to approve the matter. Authorisation stands if there is a quorum or when a matter has been agreed upon without voting.

5. Declaring personal interest in proposed arrangements/transactions

Lastly, the duties of a company director in the UK also involve stating when they directly or indirectly have personal interests in any arrangements or transactions done by the company. Directors have a duty to declare the nature as well as the extent of such interests to the other directors of the company. Declarations can be made via a notice to directors or at a director’s meeting. What’s more, declarations must be accurate or complete otherwise, further declarations must be made. A director can “escape” the legal responsibility of declaring an interest if they are not aware of such an interest or when they can’t reasonably be seen to introduce a conflict of interest or when other directors are aware.

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