The Compendium

A Comprehensive Companion for All in the Insolvency and Restructuring Profession

Director

The Companies Act 2006 defines a director as, ‘any person who holds the position of director, whatever they are called.’

Effectively, this means that even if a person who has day-to-day control or is a senior management position within a company, it does not matter what title they hold, they will be considered to be a director. As such, a director will be subject to the potential liabilities and possible penalties of a director if they are negligent or delinquent in that role.

The director performs a management role in the company. She will manage on a day-to-day basis, be a decision maker, be a signatory on accounts, contracts and online presented documents, hire and fire staff and attend board meetings.

Directors have a general duty to act in the best interests of the company, its creditors and members. They must act in the company’s best interests to promote its success. In doing so they must consider the:

  • consequences of decisions, including the long term interests of its employees;
  • need to support business relationships with suppliers, customers and others;
  • impact of its operations on the community and environment;
  • company’s reputation for high standards of business conduct;
  • need to act fairly to all members of the company.

Directors owe a ‘fiduciary duty’. This is defined in the Companies Act 2006 (sections 172 and 174) as a duty to ‘enlighten shareholder value’. This is to act in such a way as to enhance the value of the company held by stakeholders and members.

They have an objective duty, to act as would a reasonably prudent and diligent director. There is an additional subjective duty if the director has specific qualifications, greater experience, or an enhanced skill-set when compared to the ‘reasonable director’. This means, in effect, that a well-qualified director does not just need to reach the standards of a reasonable and diligent counterpart, but must reach their own additional standards.

There are different types of director. They include a ‘shadow director’, which is defined in section 251 Insolvency Act 1986 as a person whose instructions the