Directors’ duties to be affected by new legislation

16/08/07 17:51

Companies Act legislation coming into effect in October will create uncertainties, says a new report.

John Davies, head of business law at ACCA said that the new Act “raises the bar in terms of the levels of skill and care that shareholders are entitled to expect from the directors of their company.”

A study into the effects of the Act, published by the Association of Chartered Certified Accountants (ACCA) titled ‘A guide to directors’ responsibilities under the Companies Act 2006’ explains how the Companies Act will extensively affect the duties of directors.

The guide will look at how the Companies Act legislation will change the business decision-making process and, in turn, its affect on the responsibilities of the director.

It will also set out a list of individual offences that a director could be penalised for under the new law.

Davies is clear on the benefits of the Act to businesses, but also of the level of responsibility needed from directors.

“Considerations of corporate responsibility are integral to directors’ assessments of what is best for their company,” he said.

“These reforms amount to a decisive step forward in the law on directors’ duties and need to be taken seriously by all who hold appointments or are considering taking them on. The new rules apply to directors of companies of all types and sizes, including SMEs.”

He also warned that the Act will make directors more accountable than ever, as shareholders will be given increased legal powers against directors for breach of duties, and also directors may be liable to their companies if they provide them with intentionally misleading information.