Practical Steps for Directors to Consider

Practical steps for Directors to consider in light of the Companies Act 2006 coming into force:

Directors should:

ensure that they are fully aware of their new duties and responsibilities;
review the existing policies of the company in areas such as human resources, ethics, compliance and corporate responsibility against the background of the new duties and consider how compliance will be documented;
ensure that the company's management, those employees responsible for preparing board papers and presentations and others involved in governance are also aware of the duties on directors;
be aware of the terms of reference of board committees, particularly in view of the duty to promote the success of the company;
familiarise themselves with the constitution of the company, in particular any limitations on the powers of the company or the directors;
consider whether to amend their articles of association to:

take advantage of the new relaxed regime for decision-making at board and company level;
permit independent director to authorise conflicts of interest;
include or retain restrictions on a director's participation in board discussions on matters in which he is conflicted;
provide for specific conflicts of interest, such as multiple directorships;
remove provisions rendered redundant by the Companies Act 2006;
include, if appropriate, a requirement for shareholder approval of certain transactions or arrangements that would otherwise only need to be authorised by directors or declared to the board;
provide that where directors accept certain benefits from third parties their duty under s.173 is not breached;
ensure that the company is entitled to purchase and maintain insurance for a director's defence of derivative actions; and

directors should also review the terms of their Directors' and Officers' insurance to ensure that the defence of derivative claims under the Companies Act 2006 is covered.