Directors' Duties

The Companies Act 2006 sets out seven general statutory duties of a director:

  1. To act within the powers set out in the company’s Memorandum and articles of association and to exercise their powers only for permitted reasons.
  2. To act in good faith for the benefit of the Company.
  3. To exercise independent judgment.
  4. To exercise reasonable care, skill and diligence.
    1. Note: if a director has particular knowledge, skill or experience (such as being an accountant) any test as to the discharge of their duties will be judged taking that into account.
  5. To avoid conflicts or possible conflicts between themselves and the Company.
  6. Not to accept benefits from third parties by reason of their being a director unless authorised by the Company.
  7. To declare any interest in a proposed transaction or arrangement.

In addition to these general statutory duties, a director may assume further liabilities if employees under contract.

A director may, if the circumstances justify it, be disqualified from being a director under the Company Directors Disqualification Act 1986.

Note: a party could be deemed a director if they exercise sufficient influence over a company or act as if they were a director.

Generally, directors owe their duties to the Company, so it is for the Company to take action in the event of breach. It is possible for shareholders to take action in the name of the company - a derivative claim - in respect of an actual or proposed act or omission involving negligence, default, breach of duty or breach of trust by a director of the company. Claims may be brought against former directors as well as current directors.

Please note that these notes should not be relied upon as legal advice or an interpretation and application of the law to particular circumstances or matters.

The material in these notes has been designed solely for the purpose of giving general guidance. The material does not stand on its own and is not intended to be relied upon for giving specific advice.

To the fullest extent permitted by law, Gisby Harrison will not be liable by reason of any breach of contract, negligence or otherwise for loss or damage (whether direct or indirect) occasioned to any person acting or omitting to act or refraining from acting on these notes or any error or omission in the notes.

Loss and damage as referred to above shall include, but is not limited to any loss of profits or anticipated profits, damage to reputation or goodwill, loss of business or anticipated business, damages, costs, expenses incurred or payable to any 3rd party (in all cases whether direct or indirect) or any other direct or indirect loss or damage.

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