Introduction - why this and why now?

Until recently, matters relating to directors’ duties and liabilities as well as corporate governance (for larger private companies and listed companies) were seen as fairly dull and of no real interest to many/most directors. The role of the directors in recent high-profile scandals may well have changed all that.

What powers do directors have?

The directors are generally responsible for the management of the company and exercise all of its powers.

Collective responsibility

Directors have a collective responsibility to manage the company.
The law does not differentiate between executive and non-executive directors.

Statutory Duties

Directors need to be aware that they are personally subject to statutory duties in their capacity as directors of a company. In addition, the company as a separate legal entity is subject to statutory controls and the directors are responsible for ensuring that the company complies with such statutory controls.

The “Smell test”

Ask the question — forget about issues of right and wrong — but what in the hell were they thinking? Did they ever apply the olfactory test? Did they ever go back and ask themselves, ‘What would my grandmother have thought of this?’

Liabilities

One of the reasons people form limited liability companies is to limit their own exposure to business debt, because limited companies are incorporated as distinct legal entities. However, there are exceptions to directors being free of personal liability — particularly where creditors need to be protected from negligent or dishonest conduct by the directors if the company is in difficulty.