Clarkslegal LLP - Solicitors in Reading and London

Directors’ Duties

Our specialist commercial and corporate lawyers provide vital guidance to allow Directors to best represent and promote the interests of the company, from day-to-day management of a company to disputes.

Directors are uniquely subject to specific legal obligations in many areas of their business life and failure to comply can be a criminal offence with serious consequences. The Companies Act 2006 created a set of codified duties owed by directors to the company itself. These duties can be enforced by the company itself and in some circumstances by its shareholders on the company’s behalf.

Whatever challenge you face as a Director, our specialist Directors team includes leading experts in corporate, dispute resolution, employment, insolvency and regulatory law who will provide you with clear, practical and experienced guidance.

The Companies Act 2006 created a set of codified duties owed by directors to the company itself.

  • To act within their powers
  • To promote the success of the company
  • To exercise independent judgment
  • To exercise reasonable care, skill and diligence
  • To avoid conflicts of interest
  • Not to accept benefits from third parties

To declare interest in proposed transaction or arrangements with the company

These duties can be enforced by the company itself and in some circumstances by its shareholders on the company’s behalf. Our team is on hand to give expert guidance both during the day-to-day management of a company and should a dispute arise between directors.

Company Secretarial and Governance

We are often asked to advise directors on general company law matter and governance. An in-depth and solid knowledge of the Companies Acts means the team are always at hand to help. We also have a dedicated team undertaking company secretarial matters for private companies, from a registered office only facility to an all-encompassing full company secretarial service, including giving notice of and managing general meetings.

Directors and Shareholders

A company’s shareholders are its owners, whereas the day-to-day running of the company is the responsibility of its directors. There is often an overlap between these two roles, particularly with smaller companies. However, both roles carry clearly defined and different rights and responsibilities.

A well drafted shareholders’ agreement can help define the boundaries, particularly concerning the shareholders’ rights to appoint and remove directors. A shareholders’ agreement can also prevent disputes between shareholders arising in the first place or, where they do, make them more straightforward to resolve.

We also have extensive experience of acting in disputes between directors and/or shareholders, and unfair prejudice actions by minority shareholders.

Disqualification

Directors whose conduct is particularly culpable may be subject to disqualification proceedings. A term of disqualification can be made for between 2 to 15 years. In assessing unfitness, the Court will consider:

  • All misconduct, including in the disqualification proceedings themselves
  • It is not necessary for the misconduct to directly lead to the company’s insolvency
  • Conduct as director of other companies
  • Commercial misjudgement in itself does not amount to unfitness
  • Previous good conduct is not a defence, although it may be a mitigating factor
  • Misconduct should not be judged with the benefit of hindsight
  • It may a defence that the director took and acted upon professional advice

We are on hand to give sensible and pragmatic guidance through this difficult process.

Health and Safety

Health and safety must be seen as a priority for those running any organisation and it can be difficult for an individual Director to have sufficient knowledge of health and safety legislation. Health and safety legislation is enforced through Local Authorities and the Health and Safety Executive (HSE). A successful criminal prosecution can result in fines for the company and custodial sentences for directors and senior managers.

We can advise you what systems and practices need to be in place and how directors can discharge their legal obligations. Directors need to be aware that if a health and safety offence is committed with their consent, connivance or as a result of their neglect, they can be prosecuted personally and can be fined, imprisoned and disqualified as a director.

Insolvency

When a company is facing financial difficulty, its directors must also consider the interests of the company’s creditors. Failure to do so can lead to the directors incurring personal liability for wrongful trading or misfeasance.

Our business recovery team are experienced in providing, clear, practical and detailed support to insolvency practitioners, business owners, including board members and shareholders at difficult and challenging times. We recognise the urgency and have a proven record in delivering timely and tailor made support to insolvency practitioners, plus owners and management teams alike. We care about you and your business and we are here to help.

Service Contracts

A service contract will typically specify a director’s remuneration, length of fixed term, notice period and post-contractual restrictive covenants. Our top ranked employment team will ensure that this is properly drafted at the outset, to help avoid future problems. Where difficulties do arise we have many years’ experience of protecting the interests of both departing directors and their former employers.

Transactions

Directors must generally account to the company for any profit that they make from their office. However, transactions between a director and a company will be permitted if proper disclosure is given and the transaction is approved correctly by a resolution of the company’s shareholders.

Specific examples include loans to directors, substantial property transactions and contracts in which the director has a personal interest. Our team is on hand to help you stay the right side of the line.

For immediate advice and assistance from our commercial solicitors based in London and Reading, please call on 0118 958 5321 or email our commercial team.