Directors’ Duties Under the Spotlight

“Statutory directors are on duty, responsible and liable twenty four hours a day, seven days a week.. Being a director is not just about what happens around the boardroom table. There is serious work to be done..” – Bob Garratt, The Fish Rots from the Head.

Directors of limited companies and other entities with limited liability perform a vital role in the UK economy. The Institute of Directors estimates that there are just over 2 million registered company directors in the UK. They are the stewards of their organisation’s assets and money, provide the leadership and strategy to drive the organisation forward; they must identify and manage risks, as well as being aware of their wider legal and social responsibilities. Whether in the for-profit, charity or not-for-profit sector, directors occupy a crucial space in the governance of the organisation. Corporate governance is the system of direction and control that ensures the organisation fulfils its purpose and creates value over the long term, whilst respecting appropriate legal and ethical boundaries. In recent years, the public’s faith in corporate institutions has been shaken after a series of scandals involving misappropriation of funds, accounting irregularities and unethical behaviour. The past few months alone have seen relentless media attention on the impact of poor governance practices, ranging from the machinations at FIFA, a spectacular accounting scandal at Toshiba and the high profile untimely demise of the charity Kids Company amid bitter recriminations between government, regulators, trustees and management. All of this highlights the need for directors and trustees to focus attention on governance and compliance issues, before regulators do! Good governance, regulation and compliance is likely to remain firmly on the corporate agenda in coming months. Elderflower Legal & Secretarial offers a range of service packages to keep organisations compliant.

With directors’ duties under the spotlight, their role in ensuring that organisations comply with the law and sound ethical practice will assume great importance. In the course of our work with newly appointed directors, we find there are often misunderstandings and misconceptions about what the role entails and exactly what their responsibilities are. In smaller businesses and organisations, there is often informality about the governance arrangements. In a small owner-managed business, the directors and shareholders are often the same people. However, it is important for the participants to understand that they may wear different hats at different times. It is still important to understand the obligations which apply when wearing the director’s hat: the law still applies and ignorance is no defence. Elderflower Legal has produced a concise guide to help demystify and explain the issues in a digestible format. If you have any questions on the content, we would love to hear from you.

Download you free copy here.

Mark Johnson is an experienced solicitor and company secretary helping SME businesses, charities, social enterprises to manage risk, ensure good governance and protect their legal position.