ACCA LW ^Eng Syllabus F. Management, Administration And The Regulation Of Companies - Duty of Directors - Notes ^{4 / 5}

There are 6 General Duties of Directors

as per Companies Act

1. To act per Company's constitution

   and for proper purpose

2. To Promote the success of the company

   For the benefit of its members as a whole; considering:

   (a) The likely long term consequences
   (b) The interests of employees,
   (c) Business relationships with suppliers, customers and others,
   (d) The impact on community and the environment,
   (e) The reputation for high standards 
   (f) Acting fairly between members of the company.

3. To show Independent judgment

   Cannot delegate: 

   (a) Directors decisions
   (b) Appointing or terminating a director
   (c) Declaring a dividend

4. To show Reasonable skill, Care and Diligence

   This is judged by:

   "Has she exercised the knowledge, skill and experience reasonably expected of a director in that position (and of her in particular)"

   So basically to act as a reasonable person would, and if you have a particular skill or experience - then exercise those too!

5. To Avoid Conflicts of Interest

   Directors have a fiduciary duty not to benefit personally from any company contracts. However independent directors may now authorise such transactions unless the AofA prohibits such authorisation.

   For PLCs such authorisation by independent directors must be expressly permitted by the AofA.

   So Directors must disclose their interests in such contracts at the first board meeting possible - if not the contract will be voidable by the company and the director liable for her profits made and a possible fine

6. To Not accept Benefits from third parties

   This obviously includes bribes. 

   This cannot be overridden by board authorisation - like conflicts of interest contracts can be