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Duty of a Director: to exercise independent judgement

Thinking – a courageous act indeed

As a director, you can accept advice from others (and, depending on the situation, not to do so may even constitute negligence), but, ultimately, the final decision as to whether to follow the advice is your own. You cannot simply follow the decision of a third party (including a fellow director) – you need to consider the interests of the company and believe in your decision.

An important point to remember here is that you may be a director of a company which is a joint venture, or which has received investment. As a result of this structure, you may have been appointed by a shareholder or a group of shareholders. If that is the case, where do your loyalties lie? This duty to exercise independent judgement makes it clear that simply acting under the instructions (or in the interests) of one shareholder (or a shareholder group) without giving consideration to the interests of the company as a whole could be a breach of your duties. On a similar basis, where you are a director of a subsidiary, while you need to consider the interests of the parent company and the rest of the group, it is the interests of the subsidiary which prevail.

Coco Chanel once said “The most courageous act is still to think for yourself. Aloud” – As a director of a company, thinking for yourself is not a matter of courage, it is a legal necessity.

If you are a director and have any questions regarding director duties or responsibilities, please speak to our experienced corporate team:

Steven Wicks

saw@business.co.uk

Alan D Stalker WS

ads@businesslaw.co.uk

Angus McGuire

alm@businesslaw.co.uk

 

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