Running a business has become increasingly complex and challenging for Directors given aspects such as formal reporting to shareholders, the pervasive presence of social media and its effects, reliance on third party software for the storing, processing and management of information.
As a Director you will often hear the phrase “did you act within your fiduciary duty?” but what does this actually mean. The law is clear in this regard. Directors have a fiduciary duty to act in good faith, for proper purpose and with due skill, care and diligence when managing the day to day affairs of the business. According to the Companies Act this responsibility extends the definition of a Director to include an alternate Director, Prescribed Officers and Members of a Committee of the Board.
But what does this mean in reality, due to the fact that there are many laws that make provision for personal liability of Directors, including but not limited to tax health and safety and company law, Directors must ensure that they are both accountable and responsible for their actions, including ensuring that their Company has implemented a corporate governance and compliance policy and embedding it into the day to day decision making activities of the Company and then regularly monitoring the performance. Directors need to ensure that in order to avoid liability they took diligent steps to become informed, paid attention to the matter at hand and acted in good faith for what they honestly believed was in the best interests of the Company.
Director liability is a very real risk for any Director that sits on a board or any other person within the definition, and he or she should be fully aware of the risks involved and fully understand the requirements around this position.
From this perspective, compliance should be as much a part of the strategy of a business as IT management, financial forecasting and legislative requirements.
For any queries regarding corporate governance and ethics or any other commercial needs please contact Myers Attorneys on 011 346 2422 or email@example.com