Protecting Companies In Challenging Markets

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Protecting Companies In Challenging Markets

In the current financial climate directors' must be

particularly aware of their responsibilities to their company and

its employees and the circumstances in which their actions may be

open to challenge. This article seeks to highlight the key duties

that directors must consider when taking action to restructure

their company or defend against takeover action.

Directors' Statutory Duties

To act within their powers.

To act in the best long term interests of the company

(including its shareholders) – an insolvent company's

directors will owe this duty to the company's creditors.

To exercise independent judgement and reasonable care, skill

and diligence – more experienced directors will be

subject to a higher level of expectation.

To avoid, and declare, any actual or potential conflict of

interests – subject to the company's articles,

conflicts may be waived if approved by the shareholders.

Not to accept benefits from third parties if it is likely that

a conflict will arise.

DIRECTORS' DUTIES

Directors of UK companies are subject to a set of statutory

duties which, although established by case law for many years, have

been set out in statute for the first time in the Companies Act

2006. A director can be held personally liable for any losses

caused to the company as a result of any breach of these duties. In

addition, offending transactions can be unwound and the director

can...

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