General duties

A director's general duties are owed to the company and not to individual shareholders. The Act codifies certain key duties, as follows:

  1. Duty to act within powers (section 171)
  2. Duty to promote the success of the company (section 172)
  3. Duty to exercise independent judgment (section 173)
  4. Duty to exercise reasonable care, skill and diligence (section 174)
  5. Duty to avoid conflicts of interest (section 175)
  6. Duty not to accept benefits from third parties (section 176)
  7. Duty to declare interest in proposed transaction or arrangement (sections 177 to 185)
  • Other (non-statutory) general duties

    Other, non-statutory duties which a director may owe to a company include a duty not to misapply the company's property and a duty of confidentiality.

  • Director's service agreements

    An executive director will usually have a written contract of employment, commonly known as a service agreement. An executive director who is an employee will benefit from various employment laws, including the right to a statutory minimum notice period, the right to be paid at least the national minimum wage, the right not to be unfairly dismissed, following completion of the requisite period of qualifying service and protection from discrimination.

    If the director is to serve as a non-executive director, they will not normally have an employment contract or service agreement but a letter of appointment. A non-executive director's letter of appointment should, amongst other things, state the minimum time that the non-executive director will be required to spend on the company's business and seek confirmation from the non-executive director that he can devote that time to the role. Non-executive directors are not employees and do not benefit from employment rights. However, any fees paid to a non-executive director for their director services must be paid subject to deduction of tax PAYE like an employee.

  • Director's liabilities

    Being a director brings with it a high degree of responsibility and, increasingly, the risk of personal liability. Directors are not generally personally liable to third parties, unless they have given a personal guarantee for the liabilities of the company.

    However, various statutes have imposed personal liability on directors in a wide range of situations, including health and safety, environmental, competition, insolvency and securities matters. There are also a number of situations where breach by a company of certain statutory requirements can give rise to criminal offences for directors.

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