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General duties of directors

The general duties required of a director are set out in seven sections of the Companies Act. These duties are:

  1. To act within the powers of the company's constitution, and to only exercise powers for the purposes for which they are conferred.
  2. A director must seek to promote the success of the company. In so doing he must have regard to: the likely consequences of any decision in the long term; the interests of the company's employees; the need to foster the company's business relationships with suppliers, customers and others; the impact of the company's operations on the community and the environment; the desirability of the company maintaining a reputation for high standards of business conduct, and the need to act fairly as between members of the company.
  3. A director must exercise independent judgment.
  4. A director must exercise reasonable care, skill and diligence that would be exercised by a reasonably diligent person with the general knowledge, skill and experience that may reasonably be expected of a person carrying out the functions carried out by the director in relation to the company, and the general knowledge, skill and experience that the director has.
  5. A duty to avoid conflicts of interest in which he has, or can have, a direct or indirect interest that conflicts, or possibly may conflict, with the interest of the company. This applies in particular to the exploitation of any property, information or opportunity - and it is immaterial whether the company could take advantage of the property, information or opportunity.
  6. Duty not to accept benefits from third parties where conferred by reason of his being a director, or his doing (or not doing) anything as a director.
  7. Duty to declare an interest in a proposed transaction or arrangement whether directly or indirectly. He must declare the nature and extent of that interest to the other directors. The Act prescribes how this declaration is to be made as well as defining the occasions when an interest need not be declared. Chapter three of Part 10 highlights the requirement to declare in certain circumstances with regard to a declaration of interest in an existing transaction or arrangement as well as the consequences of a failure to declare interest (section 183).