The duty not to accept benefits from third parties – this prevents taking bribes but may also include benefits from being a director, shareholder, employee or advisor to a competing company. 

The duty to declare interests in a proposed transaction or arrangement with the company – a director, or shadow director, must declare the nature and extent of any interest he has in a proposed transaction or arrangement to the board of directors whether he is directly or indirectly interested in it. A director is deemed to be aware of matters which he ought reasonably to be aware of.

This will arise particularly when a director is a shareholder, director, employee or advisor to another organisation or person with whom the company is about to enter into a transaction or arrangement.

The director must make the declaration in writing and before the company enters into the transaction. He is able to give what is called a “general notice” which is where he says he has an interest in another organisation or person and is therefore to be taken as being interested in any transaction or arrangement that that organisation or person might make.

The duty to declare interests in existing transactions or arrangements – a director should declare an interest before the company enters into a transaction. This duty is primarily aimed at new directors, who should declare their interests when they are appointed. Clearly, if you have not already declared an interest you should have declared, you should do so now. 

Common law fiduciary duties remain unaffected by the new Act and there is some overlap between them and the duties in the Act, e.g. to act in the company’s best interests, to use company property for legitimate company interests only, to act in accordance with the company’s constitution, to avoid conflicts of interest and to avoid making a secret profit.

Insolvency duties remain unaffected too, such as the duties to the company’s creditors when a company becomes technically insolvent and the duty to put a company into liquidation if an insolvent liquidation cannot reasonably be avoided – see Directors’ Responsibilities in Times of Financial Trouble .

The Sanctions If you breach these duties, a court can hold you personally liable to pay back to the company any losses that it suffered or any profits that you made.

When Breaches May Come to Light
Generally, breaches of directors’ duties come to light in the following circumstances: when directors fall out with each other or the shareholders, when a director leaves, when the company is wound up or put into liquidation or administration or when the company is sold.

Certainly, if you have any concerns and one of these circumstances is about to happen, you should take legal advice to minimise the risk of you having to pay lots of money back to the company.

However, often it’s difficult to predict when something might happen so the time to consider these duties and make sure you comply is now!

For advice on your duties as a director contact Gary Cousins in confidence on 0121 778 3212 or email Gary Cousins here.

Page 2 of 2 :: First | Last :: Prev | 1 2 | Next