The final report of the three-year Company Law Review calls for a statutory statement of directors’ duties ‘to encourage responsible and informed decision-making’.
The idea is to give directors a clear statement of their duties, bringing together over 250 years of court decisions.
Clarifying directors’ duties has been a major focus of discussion during the review, undertaken by a group of business, legal and government experts. The increasingly litigious legal climate and wider public interest in the business world and its responsiblities has brought the issue to the fore.
These duties should not just be towards the company, but include directors’ responsibilities towards groups such as employees, suppliers, the local community, environment and customers.
And it should include long-term as well as short-term considerations.
The report also recommends better disclosure by a company of the training and qualifications of their directors.
Contracts of employment should be limited to three years on first appointments and one year for re-appointments, it recommends.
In addition, there should be ‘interim’ orders for disqualification of directors ‘to enable speedy preventative action in serious cases’.
Rules on conflicts of interest and dealings between a director and the company should also be tightened up, the report adds.
Trade secretary Patricia Hewitt, who has promised to look seriously at the proposals, said: ‘We need to ensure that directors know what is expected of them, that high standards of conduct are reinforced, and that behaviour reflects modern needs and expectations.’
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