Advice to company directors - Know your legal duties

When it comes to running a company or being a company director, are you aware of your legal duties? Have you paid attention to the legal details and requirements clearly outlined in the Companies Act 2006?

We understand that you may not be aware of every single duty you are responsible for. That's why we offer comprehensive advice to company directors. We work with businesses across Essex to ensure that you understand the scope of the Companies Act 2006. We want you to feel confident that you are interpreting the Act correctly. This is the best way to ensure that you adhere to the clearly defined regulations.

If you have any concerns or questions about your legal duties to your business, you should contact one of our advisors. We believe that when it comes to legislation and legal responsibilities, it's always better to err on the side of caution. Do you feel confident that you are fully aware of the various duties associated with being a director?

Our team is always happy to answer your questions. And we are happy to take the time to explain the importance of the Companies Act 2006. Please feel free to contact Thomas Emmett directly on 01245 453837

What are the general duties of directors under the Companies Act 2006?

There are many duties associated with being a company director. It's an enormous responsibility that can have serious consequences if you do not deliver your duties. Therefore, you must be well aware of the Companies Act 2006.

Below are the general duties outlined within the Companies Act 2006. Please contact us if you have any questions about any element within the Act. We are here to help you understand it correctly.

1. Act within powers

A director must act per the company's constitution (including its Articles of Association and agreements of a constitutional nature. This could include documents such as a shareholders' agreement). A company director must only exercise the powers for which they were given.

1. Promote the success of the company

A director must act in a way that they consider would be most likely to promote the company's success. A company director should always consider the following:

• The likely consequences of any long-term decision
• The interests of the company's employees
• The need to foster the company's business relationships with suppliers, customers, and other stakeholders
• The impact of the company's operations on the community and the environment
• The desirability of the company to keep a reputation for high standards of business conduct
• The need to act fairly between members of the company.

1. Exercise independent judgement

A director must exercise independent judgement and make their own decisions.

1. Exercise reasonable care, skill, and diligence

A director must exercise the same care, skill, and diligence that would be exercised by a reasonably diligent person with:

• The general knowledge, skill, and experience that may reasonably be expected of a person carrying out the same functions relating to the company
• The general knowledge, skill, and experience that the director possesses.

1. Avoid conflicts of interest

A company director must avoid a situation in which they have, or could have, an interest that conflicts, or may conflict, with the company's interests.

This applies particularly to the exploitation of any property, information, or opportunity, regardless of whether the company could take advantage of it.

This duty is not infringed if:

• The situation a director is in cannot reasonably be regarded as likely to give rise to a conflict of interest
• The situation has been pre-authorised. Authorisation may be given in the articles of association. This is by a specific shareholder resolution or, in certain circumstances, by the other directors who do not share the same conflict.

1. Not to accept benefits from third parties

A director of any company must not accept a benefit from a third party.

This particular duty is not breached if an acceptance cannot reasonably be regarded as likely to give rise to a conflict of interest.

1. Declare interests in proposed or existing transactions or arrangements with the company

If a company director is in any way, directly or indirectly, interested in a transaction or arrangement with the company, they must declare this to the other directors. For a proposed transaction, a director must make a declaration before any transaction is entered into.

In the case of existing transactions, directors must make a declaration as soon as reasonably practicable.

The duty is not infringed if:

• A director's interest in the transaction cannot reasonably be regarded as likely to give rise to a conflict of interest
• An interest has not been declared because the director was unaware they had the interest, or the other directors are already aware of it.

The remedies or penalties for breaching a general duty give rise to many remedies, including an injunction and damages. Failure to disclose an interest in an existing transaction or arrangement with the company carries a risk of a criminal fine.

Are there any other duties associated with being a director?

The Companies Act 2006 defines the statutory duties that directors must adhere to. But directors are not limited solely to the Companies Act 2006.

You will also have additional duties and responsibilities that come from other sources.

For example, you will have a duty of confidentiality. You will also have many obligations relating to various health and safety requirements. You will be aware of these responsibilities from health and safety legislation.

Various administrative duties are also required. As a company director, you are responsible for ensuring that your company's annual reports and accounts are prepared, filed, and circulated.

At Birkett Long, we consider ourselves a support service to businesses across Essex. We take the time to provide comprehensive advice to company directors, so you know exactly what your duties are as a director. We can explain the implications of legislation such as the Companies Act 2006, and where required, we can provide reminders of key deadline dates.  We will ensure that you are appropriately fulfilling all of your responsibilities correctly.

If you have any questions about being a director, or concerns about any of the duties associated with being a director, please make contact.