Corporate and Commercial
What are my Duties as a Director?
Broadly speaking, your duties to the Company are:
- To act within your powers;
- To promote the success of the Company;
- To exercise independent judgment;
- To exercise reasonable care, skill and diligence;
- To avoid conflicts of interest;
- Not to accept benefits from third parties
- To declare interests in proposed business
Further duties may be implied by common law and there are specific provisions requiring disclosure and shareholder approval (such as directors' loans and credit transactions, service contracts, directors’ interests in shares and substantial property transactions).
How will Company Law change with the introduction of the Companies Act 2006?
The Companies Act 2006 will be implemented in a number of phases and fully into force in October 2009. At over 700 pages it is the largest Act of Parliament ever passed. It will replace the Companies Acts 1985 and 1989 and other companies legislation. Despite its volume, many of the provisions represent a relaxation of the regime for private companies.
- Private companies will no longer need a company secretary;
- The entire concept of “authorised share capital” will be abolished,
- Companies may issue as many shares as required;
- Directors can give an address for service, rather than their home address;
- Directors’ duties are set out in a code;
- The rules on directors’ loans will be relaxed;
- Financial assistance for the purchase of a company’s own shares is no longer prohibited and the “whitewash” procedure will no longer be required.
What do I need to think about when trading online?
The internet is often an effective way of marketing your business and offering goods and services to a wide customer base, but there are compliance issues and trading risks which some may not foresee. For example:
- It is very easy to breach intellectual property rights (which may subsist in utilitarian text, illustrations and layout)
- Unless you specify that English Law is to apply, you may find yourself subject to foreign law
- Even if business is not transacted via your website, you need to include a geographical address and your company registration number
- You should avoid hosting anything which may be defamatory and monitor any submissions to message boards
- You must comply with the Data Protection Act when sending promotional e-mails
- If you sell goods over the internet or by other ‘distance means’, your customers may have an automatic right to return goods as they have not been able to inspect before purchase.
Should I trade as a limited company?
The main advantage of a limited company is that you are much better protected as a shareholder than as a sole trader or partner. Sole traders and partners are liable for business debts, but shareholders in a limited company need only pay the value of any unpaid shares issued to them (usually very little). Banks will often require personal guarantees when lending to a limited company.
The price to be paid for limited liability is an increased administrative burden including the need to file annual returns and accounts. These accounts are available to anyone who wants to see them (including your competitors) on payment of a small fee. There is the potential for directors to be personally liable for debts incurred whilst a company is insolvent.
Taxation considerations often play a very important part in making a decision to become “limited”.
Do we need a Shareholders’ Agreement or Partnership Agreement?
There is no legal requirement for shareholders or partners in a business to have a shareholders’ or partnership agreement but there are many reasons why it is a good idea to have one, especially in family companies.
With no specific agreement, the general law along with the Companies Act or Partnership Act will affect any disagreement. These default provisions will probably not lead to the fairest outcome and will make a compromise much more difficult. In negotiating a shareholders’ or partnership agreement many issues can be provided for at the outset, which otherwise would not have been contemplated.
Regulated by the Solicitors Regulation Authority. Haworth Holt Bell Limited Grosvenor House 45 The Downs Altrincham Cheshire WA14 2QG.
Haworth Holt Bell is the trading name of Haworth Holt Bell Limited, registered in England with Company No: 5038210
This Company is regulated by the Solicitors Regulation Authority No: 401279
