The Obligation and Role of a Company Director
The role of a company director is multi-faceted and demanding, especially because it is a top position in a company.
A director is an appointed or elected member of a company’s board of directors. Company directors are setting and implementing policies to be used across the organization.
You might find it odd, but a company director does not need to be a shareholder or employee in the organization, but he or she can still hold an office. Company directors exist based on the resolutions passed during directors’ meetings. These pronouncements, along with the corporate legislation and articles of association, outline the powers and duties of a company director.
Directors are essentially agents of the company, meaning they can enter into contracts on behalf of the firm. Such contracts include purchasing agreement with suppliers and securing loans from banks, among others.
It must be noted that the directors are the trustees of the firms and not of the individual shareholders. However, the stockholders may legally go against the directors should they be caught in fraudulent acts or abusing the power vested in them. In addition, directors are accountable for the acts of the company.
When casting a vote, directors cannot vote by proxy.
Learn the Duties and Role of a Company Director
As mentioned, company directors play a vital role in running a business. Here are their duties.
Acting on Good Faith
Every company is expecting all its employees to act on good faith and this includes directors. Expectations are higher for the directors, however, because they are much in a higher position with greater power. So, the stakeholders of the companies are expecting the directors to always have the best interest of the firm—making them not only an agent but a trustee as well. At the same time, the directors should always be transparent and diligent in their tasks to avoid major negligence. As a company director, you must be able to balance the interest of every stakeholder of the firm while making sure that the business is prospering.
Acting Based on Mandate
As mentioned, the power of a company director is based on resolutions and policies approved during a directors’ meeting. As a company director, you are only acting within the confines of the mandate. You can potentially bring harm to the company if you are going beyond your power. So, you need to be careful and ensure that all your actions are toward the company’s growth. Remember that shareholders can sue you for acting beyond your power.
Ensuring the Company Growth
As a company director, you are promoting the growth of your company. After all, business owners are looking forward to generating profits. Therefore, company directors must always remember the following:
- Think of the long-term consequence of every decision for the firm.
- Always keep in mind the interest of the firm’s employees.
- Build your company’s business relationship with clients, suppliers, and other third-party stakeholders.
- Ensure that the business practices of the company do not harm the environment.
- Always act in good faith when engaging with your business partners, customers, and suppliers, among others.
Making Unbiased Decisions for the Sake of the Company
In making decisions for the company, the company directors are always considering what is best for the company’s sake—and they should be firm about it. Company directors are not allowing anyone to make arrangements dictating their conduct during a voting process. They are always making independent decisions.
Preventing Conflict of Interest
As a company director, you are avoiding the scenarios where the interest of the company and of your own are in conflict. Company directors are complying with this by doing and adhering to the following:
- Company directors are securing the approval of the board in all the decisions and contracts to be entered by the firm. The same procedure should be followed in all circumstances to avoid abuse of power.
- The company directors are not using the firm’s property and assets, among others, for personal gain.
- Company directors are not competing with other companies.
- Company directors are executing their duties carefully and making sure that all kinds of conflict will be prevented most, if not all, the time.
Wrapping Up
As a potential owner of a company, you can take a look at the role of a company director before you register your business. This helps you prepare for things you will eventually encounter when setting up a business.
Once you become a company director, make sure to always do your due diligence in serving the business. You must always protect the integrity of the company by doing the right thing all the time.
Company directors, at the same time, are preparing themselves to avoid getting overwhelmed with the number of tasks at hand. Remember to take things one at a time. Before you know it, you are running the business smoothly.
If you need assistance for business registration, contact 3E Accounting today. Our team consists of highly skilled members ready to serve you and your company’s needs. We offer top-notch accounting and business advisory services.
3E Accounting India
3E Accounting India is a corporate service provider and accounting firm assisting clients with company formation and incorporation. We offer company secretary and business-related services in India.
