The Companies Act 2006 (CA) details the general duties a director of a limited company owes to the company which are to:
- Act only within the powers granted under the company’s articles, memorandum of association and agreements of a constitutional nature such as shareholder agreements.
- Act in a way the director considers in good faith is most likely to promote the success of the company for the benefit of its members as a whole.
- Exercise independent judgement and make their own decisions. Directors are not prevented from relying on advice, so long as they exercise their own judgement on whether or not to follow it.
- Be well informed about the company’s affairs and exercise due care, skill and diligence based on a director’s particular specialist knowledge or experience.
- Avoid conflicts between the interests of the director and those of the company. Where conflicts are unavoidable these should be disclosed fully to the board.
- Not to accept benefits from third parties by reason of being a director or doing anything as director. The company may though authorise acceptance, for instance, to enable a director to benefit from reasonable corporate hospitality.
- Declare any interest (direct or indirect) in any proposed transaction or arrangement prior to entering into it.
In addition a director has to:
- Consider or act in the interests of creditors, particularly in times where the company may not be able to pay its debts.
- Maintain confidentiality of the company’s affairs.
The company itself has a number of legal duties including:
- Under the CA, to maintain full and accurate accounting records and to make relevant filings at Companies House (including the annual statutory accounts).
- To comply with all other laws and regulations applicable to it such as tax and employment laws.
As the company acts through the board of directors, the directors are responsible for ensuring compliance by the company.