Company directors are essentially company employees but with special responsibilities and powers. But the role isn’t for everyone – it requires dedication, time, skills and commitment. If you’re thinking about becoming a director of your own business or another business owner’s company, here are 4 things you need to know about company directors.
Company directors are legally responsible for a company’s success or failure
Company boards of directors are responsible for the success or failure of their company. So, if a company goes under while you’re a director, you’re responsible for its debts. This means you could be sued by the company’s creditors or be forced to sell your assets (such as your home) to repay the company’s debts. Sadly, this happens more often than you might think. If a company becomes insolvent, directors who have failed to manage the business properly are likely to be held personally liable for the company’s debts. This is because directors are responsible for ensuring that the company operates in a way that is designed to make a profit, as well as looking after the interests of its shareholders.
Company directors are accountable for their decisions – both good and bad
Being a company director means taking responsibility for your decisions and actions. As a director, you will have to make difficult decisions – including those that may negatively affect your business or other stakeholders. If a decision you make doesn’t turn out well, you’re expected to accept responsibility for it. You’re also expected to learn from your mistakes so that you don’t make the same decision again. You may have heard the saying “a rising tide lifts all boats”. This means that when the economy is doing well, all businesses benefit, not only those in the same industry as you. This means that although you’ll be better off when the economy is doing well, you may have to share the benefits of growth with your employees or suppliers.
Directors’ duties and responsibilities
As an officer and director of your company, you have a number of fiduciary duties and responsibilities. Your main duty is to act in the best interests of your company. You must act honestly and with due care and diligence at all times. You must also act in good faith for the company’s best interests. You must undertake due diligence before you make any significant decisions for your company. These decisions could include hiring new staff, investing in new projects, or buying goods or services. Your fiduciary responsibilities also extend to your fellow directors. You must work together with your colleagues in a constructive and supportive manner. You must also be transparent with your fellow directors and shareholders. You must report any significant actions that you’ve taken or decisions you’ve made promptly. You must record these decisions in your company’s official documentation too.
Company directors have a lot of power — and responsibility
As a company director, you have a lot of power and responsibility. You have the power to make decisions that can benefit your company as well as your personal finances. You can choose to pay yourself more than the minimum wage with company profits. You can also decide how much profit to distribute to your shareholders. You can even decide not to pay dividends at all. As a director, you also have a huge amount of responsibility. You’re responsible for the day-to-day operations of your company. You’re also responsible for managing your company’s finances, staff, and long-term strategic direction.
Conclusion
Company directors must accept that they’re responsible for the success or failure of the company over which they have fiduciary control. This responsibility extends beyond the company, as directors are also beholden to the company’s shareholders. As a director, you have a lot of power and responsibility. You have the power to make decisions that can benefit your company as well as your personal finances. You can choose to pay yourself more than the minimum wage with company profits. You can also decide how much profit to distribute to your shareholders.
