Know Your Duties and Prepare to Fulfil Them; Susan Mairs from Clarke Mairs LLP Commercial Law Firm, Offers Some Advice to Company Directors on What Their Duties Are and the Repercussions of Breaking Them
Byline: Susan Mairs
IN these worrying financial times many company directors will be keen to avoid or reduce their exposure to personal liability.
Directors may be feeling vulnerable because when a company is placed into liquidation directors can be held personally responsible and action can be brought against them by liquidators seeking compensation.
However, insolvency legislation only allows this if a director has breached his or her duties.
The Companies Act 2006 ("the Act") sets out for the first time the duties that directors owe to the members of their company. This makes it easier for directors to know what they are expected to do and be fully compliable, thus avoiding personal liability. The duties, as set out in the Act, are: .. to act within directors powers .. to act in good faith in promoting the success of the company .. to exercise independent judgement .. to exercise reasonable care, skill and diligence .. to avoid conflicts of interest .. not to accept benefits from third parties .. to declare interests in proposed transactions/arrangements with the company.
Directors are strongly advised to obtain legal advice on the duties set out in the Act to ensure they have a clear understanding of their obligations and act in accordance with them at all times. …