Company directors have specific roles and obligations that go beyond the basic management of control and direction of the company and are enshrined in law and regulation. Here are four of the most important duties of a company director.
1. To maintain the company constitution
A director must act to protect the company’s constitution, particularly the articles of association that define the rules the board and company must adhere to. You may have used model articles when the company was registered or created tailored versions with a lawyer. All directors need to understand these articles, as they can affect decision-making power. Some decisions may be reversed if you exceed your powers, and you may find that you are liable for any losses that occur as a result.
It is also worth knowing that these responsibilities extend more broadly to finance and financial obligation if a director guarantee is required. Companies such as https://www.parachutelaw.co.uk/director-guarantee can review a director guarantee proposal to ensure it is fair.
2. Promoting company success
This is usually the most well-known duty, and it is a reporting requirement that means directors of companies with over 250 employees must explain in the annual report how they have fulfilled their director duties. This requirement has been in place since 2019 to ensure that directors’ decisions are transparent and designed to benefit the company and its stakeholders. This responsibility also means filing certain paperwork and reports as part of the role.
3. Independent judgement
All directors must use their independent judgement and have a strongly informed and personal view of the company activities based on their knowledge, skills, experience, and insights. They cannot be delegates who take instruction from other parties, such as key shareholders. They need to make efforts to form their own views, with learning about different parts of the company key to helping to form these views.
4. Exercise seasonal care, diligence, and skill
Directors cannot be appointed on the basis of reputation or name alone. They must be ready to exercise the necessary levels of care, diligence and skill in their role. Directors with specific training or skills, such as lawyers or accountants, are held to a higher standard than non-professional directors.
The role of a director is demanding and important, helping to steer the company to success and requiring a high degree of governance, oversight, compliance, and skill.
