Directors' Duties - Don't Be Led By the Nose!

Many businessmen accept appointment as directors in limited companies in the mistaken belief that they are protected by the limited status of the company itself. They are enticed by the perceived power and status of directorship, without properly considering the ramifications of directorial responsibility.

The primary role of a director is to participate in management of the day to day running of the company. Any prospective director should, therefore, establish carefully, and in advance, precisely what this will entail.

A director’s duties include, but are by no means limited to, the following (I am assuming for the purposes of this article that the director is a man, but this is, of course, by no means always the case):

• Acting in good faith and in the interests of the company - he must not exercise his powers for any improper collateral purpose.
• Exercising reasonable skill and care in carrying out his duties, as would be expected of someone of his knowledge and experience.
• Accounting to the company in respect of personal gain made from his position as a director
• Complying with the requirements of the Companies Acts
• Avoiding conflict of interest between the company’s business and his personal connections
• Diligently discharging all statutory duties and responsibilities in regard to health and safety
• Discharging duties owed to shareholders

Independent legal and financial advice should always be sought by a potential director, to ensure a thorough understanding of his duties, responsibilities and liabilities.