{"id":7126,"date":"2020-01-25T18:37:20","date_gmt":"2020-01-25T18:37:20","guid":{"rendered":"https:\/\/www.qualitycompanyformations.co.uk\/blog\/?p=7126"},"modified":"2024-09-18T09:43:47","modified_gmt":"2024-09-18T08:43:47","slug":"the-role-and-responsibilities-of-a-company-director","status":"publish","type":"post","link":"https:\/\/www.qualitycompanyformations.co.uk\/blog\/the-role-and-responsibilities-of-a-company-director\/","title":{"rendered":"The role and\u00a0responsibilities of a company director"},"content":{"rendered":"
\n Last updated: 18 Sep 2024<\/strong>\n <\/div>\n \n

The role of a company director comes with a number of legal responsibilities, which are set out in the Companies Act 2006 and defined in the company\u2019s articles of association. Appointed by the company members (shareholders or guarantors), directors are tasked with managing day-to-day business activities, company finances, and administrative functions on behalf of these members.<\/p>\n Set up a limited company with our Fully Inclusive Package - now only \u00a3129.99<\/span><\/a>\n \n

Whilst the role and responsibilities of company directors are distinct from those of company members, it is commonplace for the same people to be both directors and shareholders. This means that one person can own and manage a company single-handedly, which makes setting up a limited company a popular option for sole traders and self-employed individuals.<\/p>\n

General duties of a company director<\/h3>\n

Under the Companies At 2006 (sections 171-177)<\/a>, a company director has 7 general duties, which are based on certain common law rules and equitable principles. These important statutory duties are:<\/p>\n

1. To act within powers<\/strong><\/p>\n

A director must act in accordance with the decision-making powers defined in the company’s articles of association (the \u2018constitution\u2019), which is a governing document that outlines the rules and regulations for running the company.<\/p>\n

The powers of a director can vary significantly from business to business, depending on whether the company adopts Model articles of association or altered or bespoke articles.<\/p>\n

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2. To promote the success of the company<\/strong><\/p>\n

A director must act in good faith and in a manner that he\/she considers most likely to promote the company\u2019s success for the benefit of its members as a whole.<\/p>\n

In doing so, a director must have regard for the consequences of his\/her decisions on other stakeholders, including employees, creditors, suppliers, customers, and communities, as well as consider the impact on the environment, the reputation of the company, and the long-term success of the business.<\/p>\n

3. To exercise independent judgment<\/strong><\/p>\n

A company director must exercise independent judgment by developing an informed view on the activities of the business, rather than simply enacting the demands of majority shareholders or other beneficial parties.<\/p>\n

4. To exercise reasonable care, skill, and diligence<\/strong><\/p>\n

Company directors must exercise reasonable care, skill, and diligence whilst carrying out all functions of the role. This means that a director is expected to possess the general knowledge, skill, and experience that could be reasonably expected of a person appointed to such a role, rather than being appointed purely on the merit of name or reputation.<\/p>\n

5. To avoid conflicts of interest<\/strong><\/p>\n

Company directors must avoid or manage all situations in which they have, or may have, conflicts of interest that could affect their objectivity and loyalty to the company. Examples of such conflicts of interest include:<\/p>\n