Are you a Company Director? Don’t be caught offside…
Being a company director seems to go hand in hand with being a footballer these days, but what legal obligations do you take on as a result? Karen Ozdamar, Corporate Lawyer sets out some of the considerations.
Q. What obligations do I take on by becoming a company director?
A director of a company owes certain duties to that company. The 7 general statutory duties of company directors are:
- to act within powers
- to promote the success of the company
- to exercise independent judgment
- to exercise reasonable care, skill and diligence
- to avoid conflicts of interest between the director’s interests and the company’s interests
- not to accept benefits from third parties
- to declare any interest in a proposed transaction or arrangement
In addition, directors should consider the interests of the company’s creditors and keep the company’s affairs confidential.
Q. What are the consequences of breaching my duties as a company director?
You are expected to keep yourself informed about what is going on in your company and it is dangerous for directors to turn a blind eye, particularly in relation to the company’s financial situation. You are not generally responsible for the actions of other directors if you knew nothing about them and took no part, but you could be held personally liable for losses resulting from illegal acts, acting beyond your powers or failing to use sufficient care and skill.
Q. Do I need to attend board meetings?
In practice, the directors of a company will need to have at least one board meeting each year to approve the annual accounts that will need to be submitted to Companies House. Additional board meetings will be required whenever a decision is to be taken which requires board approval. It is often possible to hold board meetings over the telephone, so there may not be a need for you to attend in person though this will depend upon the provisions of the company’s articles of association.
Q. Do I have to disclose my residential address to Companies House?
You will have to give your residential address to Companies House when you are appointed as a director, but it will not be made available to the general public. However, in certain circumstances, Companies House can disclose a director’s residential address to public authorities such as the police and HMRC, and to credit reference agencies.
Q. What if I don’t want to be a director of a specific company anymore?
If there are no provisions relating to retirement as a director in any service contract that you may have with the company or in the company’s articles of association, you can generally resign as a director at any time by giving notice to the company. It will be the company’s responsibility to notify Companies House of your resignation. Remember though that resigning as a director does not allow you to walk away from problems that occurred while you were a director, and if you continue to exert influence over the board after your resignation, you could still be liable in legal proceedings if the courts treat you as a “shadow director”.
Q. Can’t my lawyers deal with the administrative tasks for me?
As the case of Lionel Messi recently highlighted, no matter who you are, you will be expected to understand the legal documents that you have signed. Your lawyer can explain the implications of anything that you might need to sign in the context of your business or personal dealings, and can deal with most administrative tasks for you.
Howard Kennedy acts for a significant number of sportsmen and women and we understand the sports industry from both a legal and commercial perspective. We are here to help you with issues that affect your business and personal life.
Get in touch with Karen Ozdamar for more information on how being a company director could affect you.