Directors owe a fiduciary duty to their companies. This often comes to light in the media as a result of investigations carried out by officials and reports of scandals concerning misappropriation of company funds, secret profits, cash for questions and bribes are reported.
The legislation that sets out the fiduciary relationship of directors to companies is in the Companies Act 2006 (2006 Act) Chapter 2 Part 10, as set out below:
s.171: Duty to act within powers
s.172: Duty to promote success of the Company
s.173: Duty to exercise independent judgement
s.174: Duty to exercise reasonable care, skill and diligence
s.175: Duty to avoid conflicts of interest
s.176: Duty not to accept benefits from 3rd parties
s.177: Duty to declare interest in proposed transactions
These duties came in to force at different times. s.171 to s.174 came into force on 1 October 2007 and s.175 to s.177 on 1 October 2008. On the relevant date, the statutory duty replaced the corresponding fiduciary duty.
Other duties that are applicable to directors, for example under common law, directors owe a duty of skill and care, a duty of mutual trust and confidence. In addition there are many statutory duties and observations, for example, health & safety laws, duties to employees and creditors, duties to abide by company laws and to disclose any interests in contracts.