Are new Directors aware of their duties?
Many young businesses are more relaxed in their approach to business life, but how many directors of such businesses fully understand the need to accurately record and minute decision making at a board level and the future consequences if they don’t?
Company directors need to be fully aware of their duties as they are accountable for their actions in company law. The company can take enforcement action against company directors and shareholders could also sue company directors.
Directors duties apply to any person who is a director, shadow director, executive and non-executive and in certain situations former directors.
Firstly, there are responsibilities to companies house which includes the confirmation statement, the annual accounts, changes in company’s officers or their personal details, changes to the registered office, allotment of shares, registration of charges ie mortgage and any changes in your company’s people with significant control. Whilst many businesses hire people such as an accountant to manage some of these things, the company director is still legally responsible.
The other key directors’ duties are:
1. To act within powers
2. To promote the success of the company considering:
– The consequences of decisions including the long term
– Interests of employees
– Need to support business relationships with suppliers, customer and others
– Impact of operation on the community and environment
– Company’s reputation for high standards of business conduct
– Need to act fairly to all members of the company.
3. Act with independent judgement
4. Exercise reasonable care, skill and diligence
5. Avoid conflicts of interest
6. Not accept third party benefits
7. Declare interests in a transaction
Companies should make sure that all directors are aware of their duties. Holding regular board meetings and clearly evidencing decision making and the steps directors have taken helps to demonstrate compliance with the above.
Getting corporate governance right from the beginning should help to reduce the risk of legal issues at a later date.