An entrepreneur who has made a firm decision to register a company, create a holding or establish a charity foundation should clearly understand the functions of a director in a future organization. This article focuses on the duties and responsibilities of the top executive (director) in a private company.
The provisions of the First Directive 68/151 / EEC of the Council of the European Communities “On the coordination of guarantees required by member countries from companies within the context of the Treaty to protect the interests of members and others with the prospect of making such guarantees the same throughout the Community” says that third party protection should be provided by provisions that limit the reasons why the obligations assumed on behalf of the company become void. The actions of the company’s bodies impose obligations on the company, even if such actions go beyond the goals of the company, provided that such actions do not go beyond the competence of these bodies, provided for or permitted by law.
However, member countries may stipulate that the company is not liable if such actions go beyond the goals of the company and it can prove that third parties knew that these actions go beyond the goals of the company, or, in accordance with the circumstances, could not know about it; disclosure of charters is not sufficient evidence of this. The limits of authority of company bodies arising from charters or decisions of a competent authority can never be considered harmful to third parties, even if they were announced.
Thus, in accordance with the Directive, the powers of the company’s bodies, in particular the director, can be limited solely by law, and in the cases provided for by law, the goals of the company.
This position is logically determined by the legal nature of the charter as an internal corporate document, which regulates relations exclusively between participants in corporate relations, and cannot create any negative consequences for third parties that are not participants in such corporate relations.
What directors are responsible for?
In accordance with the above Directive, directors are agents of their company and are in a trusting relationship with it. After registering a company in the UK, during the recruitment process, it should be borne in mind that the director must be moderately careful and carry out his functions carefully and competently.
The establishment of an investment fund or registering a company suggests that the owner is well aware of the obligations imposed on directors by law, which are aimed at protecting the company by regulating the conduct of directors.
For example, there are seven basic legally binding responsibilities that are contained in the British Companies Act:
- Work within the framework of authority
- Contribute to the success of the company
- Exercise independent judgment
- Perform reasonable care, skill and diligence
- Avoid conflict of interest
- No benefits from third parties
- Be interested in transactions or arrangements of the company.
In addition to the above, an entrepreneur wishing to establish a private company or register a holding should take into account that top executives are obliged to fulfill some other duties such as::
- keep company secrets;
- ensure proper accounting records;
- submit annual reports and other statutory documents and updates the company registers on a regular basis.
If you decide to register a company in the UK, please keep in mind that if the company director violates the obligations, the remedy is to recover damages awarded to the director for negligence in the performance of his duties.
It is indisputable that the director is responsible for entrepreneurial activity, for compliance with legal standards, for paying taxes, as well as for a number of other issues directly or indirectly relating to the company. Incorrect interpretation, failure to comply with requirements, full or partial neglect of the norms of the law entails liability. Timely qualified advice allows you to avoid situations that entail legal liability.
IQ Decision UK specialists are ready to provide advice on the issues described in the article and provide support in registering a company in the UK, or if you need help to establish an investment fund. Do not hesitate to contact us directly using the form below.