LEGAL
BECOMING A DIRECTOR
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the responsibilities they don’t tell you about
By James O’Connell, Partner Mayo Wynne Baxter
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The law has spent the past 165 years sharpening the obligations it places on directors of limited companies. These obligations are many and varied, and spring from a company’s Articles of Association, the Companies Act 2006, relevant decisions of senior judges (a.k.a. case law or common law) and other relevant legislation (e.g., the Insolvency Act 1986). In my experience as a commercial lawyer, few directors understand the responsibilities they are shouldering when they agree to be a director of a limited company.
One of the core principles of our legal system is that for individuals, everything is permitted unless it has been prohibited. But it is different for limited companies. Although they are legal entities, they are only permitted to do the range of things that the law expressly entitles them to do. Directors need to be aware (in a way that sole traders don’t) of the boundaries to the rights granted to limited companies. Companies can’t, for example, marry or (for the most part) move countries or give away assets in a Will, or adopt, or join the army.
