April 2008

More statutory duties on the way for directors

On the 1st October last year those provisions within The Companies Act 2006 that require directors of companies, private and public; to act within powers; to promote the success of the company; to exercise independent judgment; and to exercise reasonable care, skill and diligence were implemented. On the 1st October this year more provisions will be implemented that will require directors; to avoid conflicts of interest; not to accept benefits from third parties; and to declare an interest in a proposed transaction or arrangement.

This Business Briefing assumes that you understand what your directors should have done last year and considers what you need to prepare your directors for in five months time.

These statutory duties are demanding high standards from directors. For many they will not be challenging but for some they will need to clean up their act. You should make sure that all of your directors are aware of the requirements and that non-disclosure is an offence.

A director should declare to his or her fellow directors the nature and extent of any direct or indirect interest that he or she has in any transaction or arrangement entered into by the company. It must be made as soon as is reasonably practicable.

Notice must give suitable details. This could be, for example, that a member of the director's family has a significant shareholding in a customer.

It is vital to note that a director is regarded as having failed to make a declaration, and therefore could be guilty of an offence, if he or she fails to declare something that he or she should reasonably have recognised as; giving rise to conflicts of interest; acceptance of a benefit from a third party; or an interest in a proposed transaction or arrangement.

This is an extract from an article that Stephen Smith has prepared and will be published by The Company Law Resource Centre in May. If you would like a free copy of the article, please click here.

Stephen thanks Roger Mason for the quality of the information in his Step by Step Guide to implementing the new Companies Act which gave him the foundation for the article. The guide is just one of the excellent resources on The Company Law Resource Centre. For details please click here.

Stephen and Roger are both speaking at the ICSA's 3rd Companies Act 2006 Conference on 24th June in London along with many other keynote speakers, including Mike Penry from BERR who will give a progress report on the implementation of the Act. Subscribers to The Company Law Resource Centre are entitled to a 10% discount off the fee to attend. For more details of this conference please click here.

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