Business News, United Kingdom

Responsibilities of a UK company director

UK DIRECTOR learn basics

Taking on the role of a director in a UK limited company requires careful consideration and should not be taken lightly. The legislation imposes responsibilities on a director and there will be consequences if the director ignores these duties. The director’s duties are now set out in the law and there is no excuse for ignorance of the behavior required of the director.

The duties of the UK company director are very important and are there for a reason. In a situation where there are a number of shareholders they entrust the day to day running of their company to the directors. Many of the shareholders may have invested significant amounts of money in the company. They depend on the skill and knowledge of the directors to take the company forward and have the right to expect the directors to act in the interests of all the shareholders and not just in their own interest.

The directors have a duty to carry out their duties with a reasonable level of care and skill. The law measures their performance against that of a reasonably experienced person acting in the same circumstances. If the director has a particular skill set or specific knowledge and experience this would also be taken into account by the law. If the director falls below the required standard legal action can be taken by the shareholders under the Companies Act 2006.

The director also has a duty to take actions that in the opinion of that director promote the success of the company. The director cannot act just for personal interest because at all times the interests of the company and its members must be pursued. This means the interests of all of the shareholders rather than just a majority or a group of shareholders. This involves taking into account the consequences of decisions for all stakeholders including shareholders, employees, suppliers and customers, as well as the effect on the community and the environment. The reputation of the company should also be considered.

A related duty is that of exercising independent judgment. This would mean for example that although the director may take professional advice on actions concerning the company it would not be possible to follow the instructions of a particular person who has influence over the director for some reason.  Similarly the director is not permitted to receive any benefits from a third party. It is also necessary to disclose the nature and extent of any interest that the director may have in arrangements made by the company, for example a contract with another company in which the director has an interest.

In addition to the above duties the director should always act within the powers set out in the company’s constitution and in resolutions passed by meetings of the shareholders. Any person appointed as director must take these responsibilities seriously and make an effort to learn them in detail. Prospective company directors may find it useful to go on a training course or study the relevant sections of the legislation. An adviser such as an agent may be useful in helping anyone considering taking on the role of company director.

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  • UK DIRECTOR learn basics
    Business News United Kingdom

    Responsibilities of a UK company director

    Taking on the role of a director in a UK limited company requires careful consideration and should not be taken lightly. ...
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