Charitable Companies: Duties of Directors

If you are a trustee of a Northern Irish charity which is incorporated (i.e is registered at Companies House), you will also be a statutory director. As holder of that office you will be bound to comply with company law as it applies to companies in Northern Ireland. This article aims to set out simply and clearly the key duties of directors under the Companies Act 2006 (the “2006 Act”).

Historically, directors’ fiduciary and common law duties evolved largely through case law. However, in an attempt to provide greater clarity and to rectify perceived defects in this area of the law of the 2006 Act introduced a codified set of directors’ duties that replace many of those existing common law and fiduciary duties.

Chapter 2 of Part 10 of the 2006 Act sets out seven general duties which are as follows:

• to act within powers;

• to promote the success of the company;

• to exercise independent judgement;

• to exercise reasonable care, skill and diligence;

• to avoid conflicts of interest;

• not to accept benefits from third parties; and

• to declare an interest in a proposed transaction or arrangement.

It is important to note however, that the statutory statement of duties under the 2006 Act is not exhaustive, and directors will still have certain duties under common law and equity, such as the duty of confidentiality. The above only covers duties owed by a director, in his or her capacity as director, to the charitable company. Directors will have many other duties under a wide variety of other laws and regulations. In addition, directors of charitable companies will owe duties under charity law, see previous article “Charitable Companies: Duties of charity trustees” for more detail.

If you would like any further information or advice, please do not hesitate to contact Rosie Timoney or one of the other members of the Charities team at Carson McDowell.