The rules governing directors' duties have been codified in the Companies Act 2006 (the "Act"). The provisions of the Act come in to force in phases with the majority of provisions being enabled by 1 October 2008. The Act introduces four new directors' duties, together with a new statutory right for shareholders to bring an action against the directors and all of these provisions applied from the 1 October 2007.

We recommend that directors ensure they are aware of these new codified duties and are in a position to comply with them.

The New Duties
The four new directors' duties which come into force on 1 October 2007 are as follows:

1. To act within powers (s.171) - directors must act within the company's constitution and only exercise powers for the purposes for which they were conferred.


2. To promote the success of the company (s.172) - directors must act in good faith to promote the success of the company for the benefit of its members as a whole, with particular regard to six factors:
   a. the likely long term consequences of decisions;
   b. the interests of the company's employees;
   c. the company's business relationships with suppliers, customers and others;
   d. the community and the environment;
   e. the desirability of maintaining a reputation for high standards of business conduct; and
   f. the need to act fairly as between members of the company.
   
   
3. To exercise independent judgment(s.173)


4. To exercise reasonable care, skill and diligence (s.174) - judged both objectively (expected of a director, generally) and subjectively (expected of that director with his particular knowledge of facts, experience).

The three further directors' duties which are due to come into force on 1 October 2008, are:

1. To avoid conflicting interests (s.175)

2. Not to accept benefits from third parties which give rise to conflicts (s.176)

3. To declare any interest in proposed transactions or arrangements with the company (s.177)