The consequences of ignoring Director Duties

Dominic Chappell, a former owner of BHS has been banned for a decade from holding any directorships after “abusing his responsibilities”. He will not be permitted to be involved directly or indirectly, in the promotion, formation or management of a company without the permission of the court.

Pursuant to the Companies Act a director must;

• Act within the powers given under the company’s constitution
• Promote the success of the company
• Exercise independent judgement, form their own views
• Exercise reasonable care, skill and diligence
• Avoid or manage conflicts of interest which may affect objectivity

Proving a director is fulfilling these legal duties can be harder than you might think. We advise you ensure you are following best practice measures are followed:

1. You create/keep updated Articles of Association and Director Agreements.
2. You have a Conflicts of Interest tracker, which will all help to provide evidence and clarity on duties.
3. It is essential to have in depth board minutes, precisely recorded and retained as evidence. It is nearly impossible to recall when, why and by who decisions were made years ago without these full and accurate minutes.
4. Having a good director training programme to provide inductions or refresher courses to the current directors to ensure full understanding. Rather than assume your new hire or current team know the ins and outs of their legal duties a recap is never a bad idea.

For any questions or more information please contact our Company Commercial team on 01258 483602.