Are you both a director and shareholder of a company? Abigail Owen, Corporate Partner at law firm Rawlison Butler, highlights the findings from a recent Court case which is a firm reminder that these are two very different positions.
A director-shareholder may think they have two separate
identities, one as a director and the other as a shareholder, and
that when they act as a shareholder they are free from their
obligations as a director and vice versa. This is not the position
however, unless there are specific carve-outs within their
shareholders' agreement and, as such director-shareholders
should be wary of any potential conflicts between their powers as a
shareholder and duties as a director.
A director is subject to the duties set out in the Companies Act
including acting for the benefit of the company's shareholders
as a whole, to act in accordance with the company's
constitution and exercise reasonable care and skill. Although the
director may owe his seat on the board to his appointing
shareholder, the law is clear that he must comply with those duties
and put the company first, even if that is disadvantageous to the
shareholder who appointed him.
The case highlights that a director cannot vote in a particular way
(and which may be more beneficial to his appointing shareholder),
if that is not the way he would have voted in good conscience
anyway.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
