Directorship With Company

Kofi is a manager for e-digital limited a Uk company, he has shown such promise that he has been offered a directorship with the company. Before he enters into negotiations he has been instructed to get some advise on the implications for him by accepting a directorship.

a) What does it mean to be a director?

b) How will his new position differ from his current position?

c) What liabilities might he face in the future?

d) With regard to each of the questions above comment on the differences between directors in the UK and directors in either Germany or the US.

The Company Act requires all companies to have directors it leaves the determination of the functions of the board very largely to the company's constitution, which is, of course, under the control of the shareholders. Table A, in fact supposes that the board will be allocated a very significant role, for it provides in article 70 that, subject to certain exceptions, the business of the company shall be managed by the directors who may exercise all the powers of the company. However, this provision may be altered or excluded in the articles of any particular company.

The main two duties of the director are the production of the annual financial statements and the regular administration of the company, in particular its communications with Companies House. Thus, the directors are under a duty to prepare each year a balance sheet and profit and loss account and a director's report and, having done that, to approve them and to send copies to the registrar. Failure to adhere to this can result in a minor criminal sanction. Examples are where the company fails to carry out its third task with respect to the annual accounts and fail to send a copy to every shareholder, or where the company fails to keep an accurate record of its members.

The duties are in the main owed to the company, however certain duties are owed to creditors, individual shareholders, employees and other stakeholders.

A director has a fiduciary duty and its main elements can be broken down into six sub groups:

• (1) That the directors must remain within the scope of the powers which have been conferred upon them:
• (2) That directors must act in good faith in what they believe to be the best interests of the company
• (3) That they must not fetter their discretion as to how they shall act.
• (4) The final three categories are all examples of the rule against directors putting themselves in a position in which their person interests conflict with their duty to the company and the first of these is the conflict that may arise out of a transaction with the company
• (5) Or out of the directors person exploitation of the company's property information or opportunities; or
• (6) Out of the receipt from a third party of a benefit for exercising the their directorial functions in a particular way.

The German company structure is very different to the system in the UK and represents the two-tier board structure. In this structure, a supervisory board, which is not involved in the day-to-day conduct of business, watches over the managers and reports on them to the shareholders. The day-to-day conduct of business is in the hands of a management board the members of which act on important issues as a group . In other words, the intention is to put the shareholders, who are widespread, in a position to use their control rights derived from their ownership of the shareholding. It will also be seen that the supervisory board broadens control beyond shareholders to other stakeholders, in particular to employees.

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