To become a director of a UK limited company, an individual must first clear a few barriers. The question of who a corporate director can be is answered here, demonstrating that the position is not as elusive as it appears.
Although no formal credentials are required, a number of critical responsibilities must be completed. This is in addition to the company director’s obligatory responsibilities, such as establishing a business address.
Definition of a Company Director
Before determining who can be a business director, it is necessary to define a company director. A corporate director is appointed by a limited company to supervise its finances and day-to-day operations. In order to make decisions that will help the firm expand, a corporate director must operate with honesty and follow the law. He or she can bind the firm to lawful contracts with third parties (buyers, lenders, suppliers, and so on) and serve as a corporate trustee (but not the individual stockholders).
The Business Directory defines a company director as:
“An appointed or elected member of the board of directors of a company, who with other directors, has the responsibility for determining and implementing the company’s policy. A company director does not have to be a stockholder (shareholder) or an employee of the firm, and may only hold the office of director. Directors act on the basis of resolutions made at directors’ meetings, and derive their powers from the corporate legislation and from the corporate legislation and the company’s articles of association.”
A corporate director should strive to make a company successful by promoting and achieving the firm’s goals with strong judgement and expertise.
Who Can Be a Company Director? The Key Roles
Company directors constitute the “board of directors,” albeit the board may delegate some responsibilities to a board committee or a single company director.
The essential functions and obligations of a corporate director are described in the Companies Act of 2006, the articles of association, and any service contracts that may exist between a director and the business.
The Companies Act of 2006 requires company directors to:
Act Within Delegated Powers – A corporate director must follow the firm’s constitution as well as its policies and tasks – this might include the articles of association as well as larger constitutional consequences, such as shareholder/joint venture agreements.
Promote the Company’s Success – A corporate director must put the firm’s principles and success first so that the company can survive for a long time. According to the Companies Act, a director must consider, but not be limited to:
- The potential future implications of any decision
- The interests of the corporation and the interests of the employees
- Concerns about the company’s commercial connections with suppliers, customers, and others.
- The company’s point of view and involvement in environmental and community operations
- The dedication to maintaining the company’s reputation for ethical business practises.
- The responsibility of business members to act truthfully and justly.
Execute Independent Judgment – A corporation director must make autonomous decisions. They must accept the duty and accountability of making their own judgments. The company’s constitution, on the other hand, must always be followed.
Use Reasonable Skill, Care, and Diligence on a Regular Basis – A firm director must use the same skill, care, and attention as any other employee in the following areas:
- The general knowledge, ability, and experience that may be reasonably anticipated of a person doing the same duties for the organisation.
- The broad knowledge, talent, and experience that the corporate director possesses.
Avoid Conflict of Interest – A company director has to avoid a situation where a conflict of interest may arise. This is particularly important when it comes to exploitation of property, information, or opportunity. A conflict of interest must be avoided even if it may be beneficial to the company.
Refuse Third-Party Benefits – A corporation director is not permitted to receive any sort of compensation from external parties. If no conflict can be inferred from the advantages, the transaction will not be regarded an infringement.
Declare your interest in proposed/current transactions/arrangements with the company – A company director must disclose to the other company directors the extent of any interest, transaction, or arrangement with the company (directly or indirectly).
No infringement will be recognised if:
- A conflict of interest is not likely to occur as a result of reasonable analysis to determine such a conclusion of the transaction.
- An interest has not been declared because a company director is unaware that they possess the interest, or that the other directors are aware of the interest.
