Companies Act 2006 and Director's Duties
The Companies Act 2006 is the first act to specifically define the role and duties of a company director. Previously the specifics of how a director should approach their role were developed by the courts.
Director's Fiduciary Duty
The 2006 Act embodies most of the rulings determined in the courts by reiterating the view that company directors have a fiduciary obligation to enhance the standing of the company for the benefit of the members.
The Act also specifies that their role should consider both the short and long term value to the shareholders and the wider population, for example, pollution and other health risks of the business activities to the general public.
Transactions in which a Director has a Personal Interest
The prominent changes which the 2006 Act makes are that directors are no longer required to have personal transactions with the company to be ratified by the members. They merely have to inform the other directors of their interest.
Similarly, directors who are not personally involved in a specific transaction can give authority to a fellow director, who has a personal interest in that transaction to enter in to such a transaction.
Company shareholders previously had to signal their approval before the director could engage in such a transaction.
Subject to shareholder approval, private limited companies will be able to provide unrestricted loans to the company directors.