The so-called “Covid-19 pandemic” has presented several difficulties for several businesses worldwide. Amidst such an uncertain situation, it becomes necessary for companies to become aware of the responsibilities & duties they have towards the company.
The typical duties of the company director under The 2006 Companies Act:
(i) A director must act within his/her powers;
(ii) Promote the company’s success;
(iii) Exercise care, diligence, and skill;
(iv) Prevent conflicts of interests among company shareholders;
(v) Exercise bold judgment;
(vi) Declare interest within a proposed arrangement in regards to the firm;
(vii) Never accept any 3rd party benefits.
Things that company directors are required to take into account amidst the current situation across the globe
In the current economic state, the board of directors may decide to navigate the particular problems. Below are a few specific cases of the company directors’ essential matters and the decisions that must be taken regarding the present business landscape.
The director must act in a way that is most likely to encourage their company’s growth so that benefit all the members are benefitted as a whole. A company’s success will typically mean a rise in the firm’s overall value. Nonetheless, it’s up to the company director to determine if it would be suitable if a business takes specific action steps or not. The present state of the world has enabled the directors to exercise their duties through a fresh lens.
To encourage the growth of the business, directors are advised, wherever possible, to:
- study their supply mechanism along with commercial contracts to neutralize the uncertainty result due to Covid-19; regularly go through the financial details along with the cash flow position of the company to analyze the immediate (and potentially long-term) impact;
- consider the current availability of finances and aid from the government that might help to secure the business amidst the economic disturbance;
- go through their insurance covers closely for establishing the scope of insurance in regards to Covid-19 effects;
- make sure the furloughing of staff members is under review; and
- plan out safe working setups that include returning to the working state when allowed.
The sound & immediate decisions that the company directors may be required to make may necessarily be made, taking into account a shorter viewpoint of “success” instead of a more ‘normal’ period. A few of the decisions need to be made relatively quickly & in a period where the circumstances continue changing and developing at a rapid pace.
Not each decision a director makes may prove to be the most precise one & a few of the findings might have to be eventually amended or changed as the situation takes an entirely new twist.
If the decisions are taken to safeguard the company’s employees, directors cannot be held accountable for having breached any of their duties. This will avoid potential damage to the reputation of the company and ensure the company operates smoothly, even if the company undergoes a brief period of financial detriment to its stakeholders. Directors need to document each of their decisions and clarify why they were made in the first place.
In some cases, the company directors must put the creditor’s interest into account before anything else. Concerns in regards to insolvency can be especially relevant in the present conditions.
Regarding the present state of the world, it’s especially crucial that company directors become acquainted with their responsibilities & continue applying in the best way possible. Directors must remain proactive, engaged, and updated with the latest developments.