Dear …
Advice on your duties as a director.
Further to your previous request about information on your duties as a director I have
drafted this letter which briefly outlines your general duties and the consequences if you
were to breach any of these duties. I appreciate the fact that this letter is rather lengthy but
it should address all of your concerns. The area of particular importance is the section on
your duty to promote the success of the company.
1. Introduction.
As a director you owe your duties to the company itself. All directors will owe the same
general duties to the company. Your duties are very similar to that of a trustee, in that in
essence you should always act in good faith and in the interests of the company.
It is important that you understand that your duties are not to the shareholders. The
company is its own separate legal body; the shareholders are not the company. This means
that the company enforces any breach of your duties which will be brought by way of a
resolution by the shareholders or other directors.
The following are your general duties. They are by no means an exclusive list of your
obligations to the company but they should act as guidance and always be considered when
you are acting on behalf of the company.
2. Duty to act within powers.
You have a duty to act within the powers given to you by the company. This means that you
should not act in a situation that you are not sure you have permission to act in, or where
you know you do not have permission. This includes using the powers you have in a way
that they were not intended which would include entering a transaction for personal benefit
or in any way that is not in the company’s best interests.
You will be able to find details of your powers in the company’s articles of association or
your service contract.
3. Duty to promote success of the company.
Your duty to promote the success of the company is the most important of your general
duties. This duty is pervasive; it applies to all decisions that you make in your capacity of
director. You must always think about the impact of any decision you make on the
company’s relationships with other businesses, the need to act fairly to all members of the
company and business relationships, and the long term effects of the business amongst
many other relevant considerations. In essence, always consider the impact of your
decisions beyond just the company and shareholders alone.
Advice on your duties as a director.
Further to your previous request about information on your duties as a director I have
drafted this letter which briefly outlines your general duties and the consequences if you
were to breach any of these duties. I appreciate the fact that this letter is rather lengthy but
it should address all of your concerns. The area of particular importance is the section on
your duty to promote the success of the company.
1. Introduction.
As a director you owe your duties to the company itself. All directors will owe the same
general duties to the company. Your duties are very similar to that of a trustee, in that in
essence you should always act in good faith and in the interests of the company.
It is important that you understand that your duties are not to the shareholders. The
company is its own separate legal body; the shareholders are not the company. This means
that the company enforces any breach of your duties which will be brought by way of a
resolution by the shareholders or other directors.
The following are your general duties. They are by no means an exclusive list of your
obligations to the company but they should act as guidance and always be considered when
you are acting on behalf of the company.
2. Duty to act within powers.
You have a duty to act within the powers given to you by the company. This means that you
should not act in a situation that you are not sure you have permission to act in, or where
you know you do not have permission. This includes using the powers you have in a way
that they were not intended which would include entering a transaction for personal benefit
or in any way that is not in the company’s best interests.
You will be able to find details of your powers in the company’s articles of association or
your service contract.
3. Duty to promote success of the company.
Your duty to promote the success of the company is the most important of your general
duties. This duty is pervasive; it applies to all decisions that you make in your capacity of
director. You must always think about the impact of any decision you make on the
company’s relationships with other businesses, the need to act fairly to all members of the
company and business relationships, and the long term effects of the business amongst
many other relevant considerations. In essence, always consider the impact of your
decisions beyond just the company and shareholders alone.
