Are You Legal as a Company Director?
Written by Chris Barling
Monday, 14 June 2010 01:00
Implementation of the Companies Act 2006 completed a few months ago. I don’t know about you, but as a director it’s easy to miss some of the formal responsibilities of the job. As the new act makes failure to comply with quite a number of duties a criminal offence, it’s worth a reminder of just what these are.
As directors, we have special responsibilities. This doesn’t depend on having “director” in our job title, which is irrelevant. It depends on being an official director as registered with Companies House.
The provisions of the act have come into force over a number of years. Broadly, directors have the responsibility to act in the interests of all of the shareholders. So even if you are a majority shareholder, you cannot legally treat the company as your personal fiefdom.
Although being prosecuted for breaking the rules is rare, Lord Black, ex boss of The Telegraph among other major world titles, and currently languishing in a US jail, understands that playing fast and loose with the interests of shareholders can have a major downside. In fact, directors must avoid all conflicts of interest. They must declare to other directors any interest in any commercial arrangement with the company and not ever make a personal profit at the company’s expense.
You run the risk of serious penalties if you don't ensure that key information is sent to Companies House. You must also ensure that the company produces annual accounts, follows health and safety rules and obeys employment law. In fact, you must ensure that you carry out a risk assessment and put a health and safety policy in place. If the company employs more than five people, this must be in writing.
In addition, when taking decisions, directors have to consider more than just the shareholder’s interests. For instance, the interests of employees must be taken into account, and directors must exercise independent judgement, care, skill and intelligence.
In summary, directors must behave responsibly, and in a way that would never cause embarrassment if narrated in court. It’s as simple as that. Maybe the salaries that we generally pay ourselves are at last fully justifiable!
Chris Barling is CEO of ecommerce specialist. Originally published on BusinessZone.co.uk
