Directors have many responsibilities and ignore these at their peril. Rick Bond outlines their duties.
The purpose of this column is to help directors (by which I am referring to trustees, board members or governors) gain a greater understanding of their roles, and to ease many a manager?s occasional frustration by helping them to appreciate why directors sometimes act as they do.
Judging by the response to the quiz in my first article, which considered directors? duties, a few eyes were opened to the implications of becoming a director.
Having inwardly digested these duties, we must now consider the responsibilities placed upon directors (oh joy!). I?ll outline these, together with the penalties for non-compliance, and offer some recommendations for action.
The buck stops?
Directors have statutory responsibilities with which they are obliged to comply. The responsibility to meet these statutory requirements rests with a company?s directors and not with anyone else. While directors can delegate authority for the carrying out of certain activities, they cannot delegate accountability.
Responsibilities include:
- ensuring that proper accounting records are maintained
- preparing annual accounts ? a profit and loss account and balance sheet ? which give a true and fair view of the company?s affairs at a particular date
- maintaining various statutory books, such as a register of directors and secretaries, and a register of mortgages and charges, which the public is allowed to inspect
- holding directors? meetings to review the company?s financial and trading position
- ensuring that the full company name is legible
on all company correspondence, and that the company?s letters state the address of its registered office and its name, registered number and country of incorporation
- arranging for the payment of all taxes as they fall due
- complying with Statutes such as the Health and Safety at Work Act and others.
Ignorance is not bliss
This last responsibility is a crucial requirement, and yet one most easily overlooked. For example, does your board satisfy itself that the company has properly carried out Portable Appliance Testing, and completed risk assessments and method statements, and is the company, in its actions, compliant with employment law? Be warned! Failure to ensure the company is fully compliant with such statutory requirements imposes personal liability upon directors whose consent, connivance or neglect causes the company to commit a breach of the legislation. Claims by directors that they were simply unaware of their responsibilities, are, in the eyes of the law, no excuse. Attempts to suggest that managers were responsible for non-compliance are also a non-starter.
Penalties
Non-compliance can render a company liable to automatic penalties and fines. Fines, disqualification and even criminal proceedings can also be brought against individual directors, for which they can be personally liable. Non-compliance may also undermine fundraising activities. Increasingly funding bodies seek to ensure that the company seeking funding is conducting its business affairs in a proper manner.
It is essential therefore, that directors are properly informed about statutory requirements, for which they are jointly and severally responsible. They must have in place appropriate systems and checks to ensure compliance.
Be prepared
Do you have an ?induction pack? for board members, and, if so, does it outline director duties and responsibilities? Does the pack outline the systems and checks in place to ensure compliance and the board?s role in formally satisfying itself that they have been carried out? To keep abreast of changes it is worth noting the information provided by solicitors and accountants. Umbrella organisations such as the Theatrical Management Association and the Independent Theatre Council regularly provide essential updates on legal and financial law changes and their implications (in themselves probably worth the membership fees!). Copies of such articles can be included in papers to your board members.
The main reason much of the legislation has been created is simply to ensure that a company is being properly and effectively managed as a viable entity. While the implications for non-compliance can be worrying, a board that can demonstrate it is conducting its affairs properly should have no cause for concern and indeed, is much more likely to be sustainable.
Rick Bond is Director of The Complete Works (UK) Ltd., a company specialising in management consultancy, training and facilitation for cultural organisations in the UK.
w: http://www.thecompleteworks.org.uk;
e: info@thecompleteworks.org.uk;
t: 01598 710698
For further details of the statutory responsibilities of directors, email Rick and he will gladly forward some essential reading!