What being a director requires.
WHAT DIRECTORS OWE THE COMPANY
To act in its best interests To exercise powers for their proper purpose To exercise reasonable care, skill and diligence To avoid conflicts, or to declare and manage them Not to make secret profits To act honestly and in good faith
WHY IN THE COMPANY'S INTERESTS
The duty is owed to the company, not to the shareholder who appointed you.
WHAT THAT MEANS IN PRACTICE
A director appointed by one shareholder must still act for the company as a whole.
WHAT REASONABLE CARE MEANS
What a reasonably diligent person would do, considering your actual knowledge and experience.
WHY THAT MATTERS
Greater expertise brings a higher expectation.
WHAT CONFLICTS LOOK LIKE
A company contracting with a director's other business Employing a relative Taking an opportunity the company could have taken Personal interest in a transaction
WHAT TO DO ABOUT THEM
Declare them, before the decision, and record the declaration.
WHAT ELSE TO DO
Withdraw from the decision, generally.
WHY DECLARE RATHER THAN CONCEAL
Declared conflicts are manageable; concealed ones are breaches.
WHAT DIRECTORS MUST NOT DO
Use company property or information for personal benefit Compete with the company Accept benefits from third parties for their position
WHAT HAPPENS ON BREACH
Personal liability to the company, and potentially other consequences.
WHAT TO ESTABLISH
That every director understands these duties.
WHY
Directors of small companies frequently do not know they exist.
