What! Me! It can’t be?

What! Me! It can’t be?

The title of this blog reflects the response often given by directors when they begin to understand what the law actually says about the position they sit in. Some of the things that challenge directors include
  • Directorship is actually a selfless role – it is a role that is primarily defined as ‘acting in the best interests of the company ‘. While many directors can rattle this off mindlessly once they begin to realise the extent to which this can impact exactly how they are expected to behave – not just in the boardroom but also before and after they have been there – they often throw up their arms and say the above ‘what! Me! …’
  • The requirements for directorship go way beyond meetings and agendas. Most have not early asked themselves the question what does the law actually require? What does it look like? How must I act to satisfy the legal requirements ‘on me in my role as a director? This is a set of very pertinent questions especially since the law does not provide a set of ‘thou shalt not’s’ rather the legal requirements are summarised in a succinct set of ‘thou shalts’. The ‘thou shalts’ consist of another well-known set of words – few however dig deeper to try to fully understand what they really mean. While the words are short their meaning is massive. Care, skill and diligence. What do these actually mean, what do they look like, what do they require of a director? In addition imperatives to know what they are doing, declare any conflict, be very aware of what they do with information they are exposed to and the like do ensure that the bar for directorship is an extremely high one!
  • And then the liability issue! Too many directors still think that they are protected by a corporate veil. Little do they know that as a result of the corporate shock waves that began with Enron and a group of like mindedly devious companies this veil has been torn ‘from top to bottom’! Liability carried by directors is (i) personal (ii) joint and severable ie each director can be sued for the full amount of any claim and (iii) unlimited.
With these and similar thoughts dominating the corporate landscape directors cannot afford to make any assumptions about what they are doing as directors and how they are doing it. Just because ‘that is the way we have always done it’ does not mean that it is still a valid, or legally permissable, way of doing things. All directors need to quickly get up to speed on their personal duties and then work together with their fellow directors to work out how they can work together.

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