The Companies Act 2006 has changed the law on duties of directors. From 1st October four of the new seven duties placed on directors of companies are in force.
John Guest says:-
“The four new duties are that the director must act within the powers granted to them by their company, that they must exercise independent judgement, must use reasonable skill, care and diligence and must promote the success of their company. The other three duties come into force in October 2008 - to avoid conflicts of interest, declare interests in transactions with which the company is involved and a duty not to accept benefits from third parties.
Many of these duties already exist as developed in case law over the years but this is the first time they have been written down in a statute. The duty to promote the success of the company extends the existing law. The director has to “act in the way he considers, in good faith, would be most likely to promote the success of the company for the benefit of its members as a whole” This will include considering the interests of the employees, what consequences a decision will have long term, fostering good relationships with suppliers, customers and others, impact of the business on the community and environment and keeping the company’s reputation for high standards high.
If a director does not pay heed to these issues then they could be sued later by shareholders suing in the company’s name.
For more information on directors’ duties and the Companies Act 2006 in general call John on 01329 822333.
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