Directors duties: get the details right

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Jennifer Adams
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Many become directors for one reason and one reason only - to save on their tax bill via the ‘salary/dividend’ method. Jennifer Adams offers some advice to help directors get the details right.

However, what those directors might not appreciate is that the role requires them to undertake specific legal duties; the penalties for non-compliance can be severe to include possible criminal proceedings.

This checklist is intended to form the basis of a list that can be given to all directors for their reference; if the reader is aware of additional legal duties please feel free to append.

  • Prime Duty

Directors hold a position of trust on behalf of the company’s shareholders. Their prime duty is to manage the company for the benefit of those shareholders and not for any individual shareholder or group of shareholders.

  • Statutory Duties

As with many UK legal rules the duties owed by directors derive from Common Law having evolved as a result of different rulings, comments and decisions made in Court Cases over the years. The Companies Act 2006 ‘codified’ (brought together) some of those rulings with particular relevance to ‘conflicts of interest’ such that there are now seven statutory duties as follows: S172 – s177 Companies Act 2006.

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01st Jun 2011 10:26

Another ....

I have found another Act which gives right of prosecution against directors in their personal capacity. Hidden within in the Road Traffic Act 1988 is s172 which states:

‘Where a body corporate is guilty of an offence under this section and the offence is proved to have been committed with the consent or connivance of, or to be attributable to neglect on the part of, a director, manager, secretary or other similar officer of the body corporate, or a person who was purporting to act in any such capacity, he, as well as the body corporate, is guilty of that offence and liable to be proceeded against and punished accordingly.’ Put in plain English this means that if an company’s employee is done for speeding, doesn’t own up and the company (in whose name the car is registered) cannot trace who was driving on the day of the accident then the director will find himself (herself?) in Court facing a fine and penalty points on his/her personal license.

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01st Jun 2011 11:43

directors' badness

am i correct that such matters as fiduciary duties and the 1962 theft act are applicable.

can a non-director shareholder - say with 33 per cent holding of ord shares - have rights to make the other director shareholders take action against agents who have shown to have not carried out implied duties. does this mean a lengthy derivative action. in this case the property agents not only know the properties and area well but have obviously not been diligent.

the director who is in effect the executive in common term should have known better but will no doubt throw blame onto the agents as not being of professional status.  in effect as bad as one another but with the potential losses incurred, something has to be done.



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30th Dec 2013 17:59

Information on directors from Companies House.

Free companies House account information and information on which companies have charges and taken out mortgages are available here for free companies house webcheck.

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