You might have recently taken on the role of a company director. Are you aware of the legal requirements that a director should follow?
Next, to the director appointment, he/she will be expected to fulfill certain duties to the shareholders, employees, and the company itself. The company director is finally held responsible (blamed) if deadlines are not met, or if a terrible fault is made. This article gives a brief understanding of the key responsibilities of a limited company director and who governs it, in particular.
Who governs the director’s responsibilities
The Companies Act 2006 is a fundamental part of the regulation that controls/governs a company law in the UK. These statutory regulations are applicable to all entities irrespective of their sizes – including the large corporation. Listed below are the general duties of a director as described in The Companies Act 2006:
- Act within the set power
- Promote the success of the company
- Exercise independent judgment
- Exercise reasonable skill, care, and diligence
- Specifically, avoid conflicts of interest
- At any rate, do not accept the benefits of interest from third parties
- Finally, declare an interest in proposed agreement or transaction
Statutory requirements of a director:
1. Act within the company’s constitution:
The article of Association is the first and foremost of a company’s structure. It explains in detail the key set of rules for both the company and its directors. A director should act within his power subject to the company’s constitution.
At the time of company formation, each company will tailor their own articles with the help of a legal guide. A company director should get used to the articles of association. Staying aware of the articles help him to take the right decision in almost all scenarios. Because exceeding the set power might cause serious consequences and might end up getting penalized.
2. Promote the company’s success:
The next well-known director’s duty is to promote the company’s success. It is an obvious task for a director and it involves a lot of dedication. The following duties are listed in relation to promoting companies success:
- A director must act in a way that they think, in good faith and integrity so that they can promote the company’s success
- While taking decisions, the directors must keep in mind the likely consequences of all the parties inside and outside the company
- A director should take into account the reputation and success of both the company and its owners in the long term
- The directors should be broad-minded and also take into account the interest of all the parties involved.
3. Promote the company’s success:
The directors should not merely come and go as delegates but they should use their authority to bring forth independent decisions whenever required. He/she must come up with their own thoughts and views about the company policies and other business opportunities.
4. Exercise duty with reasonable skill, care, and diligence:
He/she will be expected to have the proper knowledge and should have the skill to carry out certain official dealings. And hence, the director should be reasonably active and possess ample experience related to the field that they are in.