Duties of a director Flashcards
What are the seven duties of a director?
- Act within their powers
- Promote the success of the company
- Exercise independent judgement
- Exercise reasonable care, skill, and diligence
- Avoid conflicts of interest
- Not accept benefits from third parties
- Declare interest in transactions or arrangements
What defines the powers of a director, and with what purpose can they be exercised?
Directors must act within their powers under the company’s constitution, and only exercise their powers for the purpose for which they were conferred.
What does it mean for a director to promote the success of the company
A director must act in a way they considers, in good faith, would be most likely to promote the success of the company for the benefit of its members as a whole.
They must have regard for the likely consequences of a decision, and rake account of the:
- interests of employees
- impact on the community and environment
- need to foster business relationships with suppliers, customers, and others
- need to act fairly between members
- a need to maintain a reputation for high standards of business and conduct
What does it mean for a director to exercise independent judgement
The requirement of common law directors to exercise their powers independently, without subordinating their powers to the will of others and without fettering their discretion.
What does it mean for a director to exercise reasonable care, skill and diligence
Directors must exercise such reasonable skill, care, and diligence with:
- the general knowledge, skill, and experience that can be reasonable expected of someone in their position
- the directors actual general knowledge, skills, and experience
What applies when a director is to avoid conflicts of interest
This applies in particular to the exploitation of property, information, or opportunity.
It also applies to conflict of duty, and includes the interest of ‘connected persons’
What is the duty of a director to not accept benefits from third parties
These are benefits given because of the position held by the director, or because of anything the director has done within their capacity as the director.
Acceptance of benefits is not subject to any ‘de minimis’ limit and is only permitted when approved by the companies members, or it can be reasonably regarded as not giving rise to a conflict of interest.
What does it mean for a director to declare interests in transactions or arrangements?
The director has a statutory duty to disclose any direct or indirect interest they have in either proposed or existing transactions and arrangements.
