So, you have landed your first appointment as a director of a company – Congratulations!

But what do you need to know about your legal responsibilities?

Ignorance may be bliss, but it has not been a defence since Roman times.

What is different?

With great power comes added responsibility.

Being a director of a company brings defined legal duties. It doesn’t matter how small or how large the company is, there are 6 key things you must do. Personally, I believe that any senior businessperson, not just directors, should adhere to these standards.

1. Act within the powers of the company – these are usually set out in the Articles of Association, so ask to see them.
2. Make decisions that promote the success of the company in the long term for the benefit of shareholders, considering the impact on
   1. Stakeholders, such as employees or suppliers,
   2. the environment,
   3. the reputation of the business.
3. Exercise independent judgement and don’t accept something from a third party which might affect that.
4. Avoid conflicts of interest and transparently declare any if you do have them.
5. Don’t misuse company property ( no matter how tempting that private jet may be!)
6. Keep the company’s business affairs confidential.

What’s your role?

• Set the strategy
• Be the behaviours and culture you expect from others
• Hold management accountable
• Communicate to, and be transparent with, shareholders

How Bad could it Get?

There are only a few things that can potentially land you in jail, so try to stay clear of them.

• Fraud/ false accounting – make sure the numbers are right.
• Trading when you know you can’t pay your debts.
• Bribery or corruption
• Causing significant harm to the environment
• Being reckless about health and safety
• Tax evasion and dishonesty (see Boris Becker for details!) 

How do I Protect Myself?

1. Exercise reasonable skill and care to the best of your ability. You’re not expected to have the same financial expertise as a qualified accountant, but if you are an operations director you should know about your health and safety responsibilities. Be curious. Ask questions. Seek expert help if you’re not sure or have any concerns.
2. Take the following 10 steps to demonstrate accountability, integrity, and trustworthiness.

• Clearly define the roles and responsibilities of directors, managers and employees including powers and financial authority limits.
• Have a diverse board with a mix of skills and experiences relevant to the business.
• Create a code of conduct outlining expected behaviours and ethical standards and have an effective whistleblowing facility for anyone to raise concerns directly with the board.
• Monitor and manage risks and conduct regular risk assessments.
• Regular reporting to the board on financial and other key aspects of the business including feedback from stakeholders e.g. employees, customers, suppliers, regulators.
• Maintain open and honest communication to shareholders about performance.
• Schedule regular board meetings with clear agendas and keep detailed minutes. Get expert independent advice where relevant.
• Regularly review the performance of management and the effectiveness of the board itself.
• Have a crisis management plan to respond to unexpected events and have recovery plans for each part of the business.
• Stay up to date with changes in relevant law and regulation e.g. employment, food safety, health and safety, environmental, financial reporting.