Last week, we began a new blog series on the topic of directors. In Part 1, we discussed how to determine who a director is; we also looked at the potential risk associated with being a director. If you missed Part 1, we recommend you start there before you read this post. Read Part 1 here. This week, we look at the question, “What are my duties as a director?”.
We ended off the last post by noting that if you are a director, your level of risk is considerably high and can be enforced by various parties. Because of this, it is important to manage your risk. In order to manage this risk, you need to be aware of your duties as a director. If you can fulfill the duties mentioned below, you have already gone a long way to protect yourself.
What are my duties as a director?
Being a director is no easy task. The new Companies Act details your duties. They are wide-ranging and burdensome. What we will lay out in this post is a basic summary of these duties to serve as a starting point. If you are unclear on any duty in particular, we recommend you obtain advice from a legal professional. You can contact Gunstons at [email protected].
The new Companies Act states that as a director:
* You are required to act strictly within the bounds of your authority, as defined by the Companies Act and your company’s Memorandum of Incorporation.
* You must not acquiesce to the company operating in a manner that is reckless, grossly negligent or fraudulent.
* You must not be involved in any act or omission that has the purpose of defrauding a creditor, employee or shareholder of the company.
* You must not sign, consent to or authorise any misleading financial statements or information.
* You are required to vote against any proposed activity that is prohibited, for example, payment of a dividend to a company’s prejudice.
* You must never use your position as a director (or information you have obtained as a result of that position) to gain an advantage for yourself or any other person other than the company.
* You must never knowingly cause harm to the company.
* You are required to inform your company of any information that is relevant to the company.
* You are required to act:
- In good faith and for a proper purpose.
- In the company’s best interests.
- With the degree of care, skill and diligence required of a director in your position.
If you need clarity on any of these duties, please contact [email protected] for advice.
Understanding these duties is one of the steps necessary to tackle the question of managing your risk as a director. Now that we have looked at the duties, we can look at the question of risk management next week. Subscribe to our blog to stay in the loop!
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