Generally, company director is bound by the terms of the company’s charter set out in the Memorandum and Articles of Associations. In other words, your company director can exercise all the powers permitted by the memorandum and articles which are not reserved to be exercised by the shareholders in general meeting.
Director legal duties
In the event that your director is the majority shareholder and also the sole director, the rule may be despotic. However, your company director must act in accordance with the Companies Act and the general law. Your director’s duties include the following.
- A fiduciary duty to your company to act honestly and in good faith in the best interests of your company as a whole.
- A duty to exercise such a degree of skill and care in carrying out his duties as might reasonably be expected from someone of his ability and experience.
- A duty to fulfil your company’s statutory obligations imposed by the Companies Acts and other legislation at all times. For examples, to submit company accounts, confirmation statement and notify any changes of circumstances of the company in a timely manner.
Director in a position of trust
Concurrently, your director has the duty to act honestly, in good faith and in the best interests of your company which imposes a trustee’s responsibility. This includes to take proper care of your company assets and to ensure payments are properly made and supported by adequate documentation.
In other words, your director must keep property accounting records. For instance, to have a system for cash management for staff and booking of all transactions in the company’s records.
Similarly, not to misappropriate company’s cash for personal use. For example, use your company to fund a luxury lifestyle. Or bought a car solely for personal use but put through the transaction in the company’s books.
Conflict of interests
On the other hand, your director must not make a personal profit at your company’s expense. He/she must disclose to the other directors at the board meetings any interests in your company transactions.
Furthermore, your director must disclose the transactions at the general meetings and include it in the minutes.
Another key point, your director must disclose the transactions in your company accounts. This type of transaction is classified as a related party transaction.
Furthermore, your director’s personal interests must not conflict with those of your company. For instance, they must not use your company assets for personal benefit. This includes knowledge acquired through the company.