Professionals at a Coventry and Warwickshire-based law firm are urging company directors to make sure they know their duties this New Year.
Lawyers at Mander Hadley Solicitors, which has offices in Coventry and Kenilworth, issued the warning amid fears that many directors might not be familiar with their duties and obligations.
Directors owe numerous duties to a company. These duties were developed by the courts over a long period of time before some were enshrined in the Companies Act 2006 (CA 2006). The duties of a director set out in the CA 2006 sections 171-177 are often known as the general duties.
John Morgan, a Senior Associate at Mander Hadley Solicitors, said: “The general duties include the duty to promote the success of the company, the duty to exercise independent judgment, the duty to exercise reasonable care, skill and diligence, the duty to avoid conflicts of interest, the duty not to accept benefits from third parties and the duty to declare interests in proposed transactions or arrangements.
“It is also a criminal offence to fail to declare an interest in existing transactions or arrangements.”
He said that the general duties are not exhaustive and directors should be aware of other legislation that may apply, such as in an insolvency situation where liability can arise for wrongful trading, fraudulent trading and transactions carried out at an undervalue or where a preference is given.
He added: “Potential liability also arises for a director under sector-specific legislation, for example in relation to unsolicited marketing communications where the Information Commissioner’s Office has the power to fine directors in addition to companies for nuisance calls and messages.
“If a director breaches one or more of the general duties he may leave himself open to a civil action from the company with the possible consequences of damages or compensation, restoration of the company’s profits and an account of profits made by the director.
“Directors should always seek legal advice before taking any action if they are unsure whether it would be in breach of their duties.”
