An Overview of Directors’ Duties

• Acting in accordance with the company’s constitution and only exercising powers for their given purposes.
• The constitution includes the company’s articles of association and any resolutions/agreements affecting the constitution like shareholders agreements.
• Powers can refer to the company’s objects but a company is no longer required by law to set an objects clause. However, it is common for directors to be otherwise restricted by the company in what they can do.

• Acting in the way they consider, in good faith, would be most likely to promote the success of the company for the benefit of the members as a whole.
• Success is understood usually to mean a long-term increase in value (although a director will ultimately need to decide, in good faith, whether a particular action is appropriate for the company).
• A director must have regard to a non-exhaustive list of matters at s.172 of the Act.

• Directors are to make their own decisions.
• However, this doesn’t mean that the director can ignore the company’s constitution.
• It also doesn’t prevent the director from taking advice.

• the general knowledge, skill, and experience that may reasonably be expected of a person carrying out the functions carried out by the director in relation to the company; and
• the general knowledge, skill, and experience that the director actually has.

A director should therefore be sufficiently qualified/experienced to carry out functions that might reasonably be expected of them. Directors must also exercise their duties diligently and cannot escape liability by inactivity/avoiding responsibility.

• Avoiding situations in which they have or can have a direct/indirect interest that conflicts, or could conflict, with the company’s interests.
• This applies in particular to the taking advantage of the property, information, or opportunity; regardless of whether the company could exploit it.
• Conflicts could include personal interests, other business interests, or the interests of family members.
• Conflicts can be authorised but care should be taken as this is a strict duty.

• This refers to benefits being given because you are a director, or in return for the director doing/not doing something. This applies regardless of motive.
• However, it isn’t infringed if the acceptance cannot reasonably be regarded as likely to give rise to a conflict of interest.

• This declaration must be made before the company enters into the proposed transaction/arrangement.
• In certain permitted circumstances a declaration is not needed.
• There is a separate duty under s.182 of the Act to disclose previously undeclared interests as soon as reasonably possible in relation to arrangements already entered into by the company.