Director’s Duties
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Directors’ Duties The Companies Act 2006 is reported to be the largest piece of legislation ever to be enacted. 1300 sections and 16 schedules make it approximately the size of telephone directory! Some parts are not yet enacted but it is intended to be fully implemented by October 2008 when it will replace the Companies Act 1985 in its entirety. Its intention is to consolidate the current companies legislation, together with some of the common law rules and equitable principles including those relating to directors duties creating a more comprehensive code of company law providing clarity and consistency. Current Position Currently directors are subject to a variety of duties embodied in common law rules and equitable principles. The current position may be summarised as follows: Directors must act in a way that they believe to be in the interests of the Company and its shareholders, both current and future, as a whole. This duty is owed to the company itself and not to individual shareholders. In addition the CA 1985 specifies certain duties and guidelines, including that directors are to have regard to the interests of the company’s employees in general as well as the interests of shareholders. However again this duty is not owed directly to employees. The commercial reality is that the manner in which directors currently uphold their duties varies widely, largely depending upon the nature of the issues in question, the company concerned and the understanding and knowledge of the individual directors of their duties and responsibilities. It has been recognised that a number of directors are unaware of the extent of their duties as provided by common law. This is evidenced by the increasing number of directors disqualification proceedings, settled either by way of voluntary undertaking or by court order. However it is also acknowledged there are those directors who have the knowledge, experience and skills who understand the requirements