What responsibilities have the private company directors? - read in the blog of the company COREDO

What responsibilities have the private company directors?


In this article, we will discuss what functions and responsibilities a director has once they start a company, a holding, or a charity foundation and become the top executive.

Legislative conditions

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” states that the reasons why the company’s obligations can be annulled are limited in order to protect the third party. The obligations are imposed on the company by the actions of the company’s bodies. These actions can even go beyond the company’s goals and are dictated by the competence of the bodies and by law.

Yet, if the actions go beyond the company’s goals member countries of the EU can stipulate that the company is not responsible and prove that it was also clear for the third party. Even if being announced, no limits of the company’s bodies’ authority can be viewed as harmful for the third party.

According to the Directive, law and, if allowed, the company’s goals dictate the powers of the company’s bodies.

Being an internal corporate document, the charter determines this position and regulates relations only between participants of the corporate relation without having any negative influence on third parties who are not a part of that relation.

Directors’ responsibilities

The Directive mentioned earlier implies that directors are the agents for their companies and have a trusting relationship with it. In the UK, once the company is registered the director has to perform their functions carefully and expertly especially during the recruitment phase. Law imposes certain obligations on directors of the freshly created company or investment fund, that are created for the protection of the company.

The British Companies Act, for example, has seven standards for legal responsibilities:

  • Working within the framework of the authority
  • Contributing to the company’s success
  • Practicing independent judgment
  • Acting with reasonable care, expertise, and attentiveness
  • Avoiding conflicts of interest
  • Not receiving benefits from third parties
  • Being engaged in the company’s operations and procedures.

Moreover, it should be taken into consideration by the new businessmen that there are other duties of top executives like:

  • Ensuring that accounting is done thoroughly
  • Keeping the company’s confidences
  • Regularly submitting statutory documents like annual reports to the company registers.

If the director does not fulfill the obligations, the damages from the negligence in the performance of their duties must be recovered, and this is valid for companies registered in the UK.

Legal advice

Being the director brings responsibility for many aspects of the company’s activity: entrepreneurial operations, compliance with legal requirements, taxation, and other multiple issues. If any of them are misunderstood, not complied with, or neglected, the director is liable for the violation of law. It is crucial therefore to seek legal advice in order to prevent unpleasant situations, and, most importantly, do it in time.

COREDO is here to provide you with legal advice on registering a company and being a director. Contact us to have a meeting with legal professionals on these and other issues.


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