7 Legal Duties Of A Director

Question 1

Act within powers

Answer 1

• Act within the company’s constitution
• arcticles of association determined how to be governed. Not the same for every company

Question 2

Promote success of the company

Answer 2

1. Promote the benefit of the success of the company to its employees

• regarding any long term effect of any decision
• the interest of the company employees
• fostering business relationships with suppliers and customers
• impact of operations on the community and environment
  Maintaining high reputation for standards of business conduct
• act fairly between members of the community

What success means to a number of stakeholders

Question 3

Excercise independent judgment

Answer 3

• A director must not be swayed by a shareholder who appointed them.
• must make decisions independently
• can take advice off lawyers and accountants but ultimately free from interference

Question 4

Exercise reasonable care, skill and diligence

Answer 4

• must use any skills or knowledge they have.

E.g a professional qualified accountant is expected to be a director and also use accountancy skills for the company

Question 5

Avoid conflict of interest

Answer 5

E.g

• a customer is a supplier or customer of the company

Director should explore conflict of interest or notify board.

Conflicts of interest can be authorised, but needs to be agreed in advance.

Question 6

Not accept benefits from third parties

Answer 6

• benefits offered because director
• prevents bribing
• many companies have policies for benefits to help guide directors

Question 7

Declare interest in propose action or arrangement

Answer 7

-Directors must tell other directors if company is entering transaction the might personally benefit director.
-Must be disclosed before the transaction takes place