Want to talk to an expert employment law solicitor?

You'll receive a callback from a specialist within an hour

Each private company must have at least one director – and public companies must have at least two. Directors effectively run the company – they have extensive powers to manage the business, including passing resolutions at board meetings to make decisions relating to company practice and procedure. However, the directors of the company are not its owners (these are the shareholders) so there are a number of duties that apply to the way directors exercise these powers. One of these duties is the duty for directors to take reasonable care, skill and diligence in the exercise of these powers. We’re going to have a look at this duty below, including examining the following:

  1. Where is the duty of reasonable care, skill and diligence specified?
  2. What standard of care do directors have to live up to?
  3. Is there any other way in which a director could be held to this standard?

Where is the duty of reasonable care, skill and diligence specified?

This duty, until the Companies Act 2006, was a common law duty. However, since the CA 2006 came into force the duty is codified under s.174 of the same Act. Under s.174 a director must exercise reasonable care, skill and diligence. This means the care, skill and diligence that would be exercised by a reasonably diligent person with:

a)      The general knowledge, skill and experience which may reasonably be expected of a person carrying out the functions carried out by the director in relation to the company; and

b)      The general knowledge, skill and experience that the director has

What standard of care do directors have to live up to?

Directors must carry out their functions with sufficient care and competence. However, there is a two-part test (derived from Norman v Theodore Goddard [1991] BCC 14) which lays down the standard of care expected from directors:

  1. A de minimis, objective test  – what is required of the reasonable director carrying out the particular functions that they’re responsible for
  2. A subjective test – whether, judged by the experience, skill and knowledge that the individual director has, they’ve fallen below a certain standard in their conduct

If the director has a higher standard of knowledge, experience and skill than that expected under the first part of the test then they will be judged on whether they have reached the standard expected in the second part of the test. For example, a director who has a long period of service will be expected to perform to a higher standard than a newly-appointed director.

Is there any other way in which a director could be held to this standard?

An executive director (who will normally have a written contract of employment) will be required to comply with the express and implied duties contained within their contract of employment, including the express term requiring a duty of skill and care.

logo_website

About Chris Hadrill

Chris is a specialist employment lawyer at Redmans. He specialises in contentious and non-contentious employment matters, including breach of contract claims, compromise agreements and Employment Tribunal cases. He writes on employment law matters on a variety of websites, including Direct 2 Lawyers, Lawontheweb.co.uk, LegalVoice, the Justice Gap and his own blog. Contact Chris by emailing him at chadrill@redmans.co.uk

Want to talk to an expert employment law solicitor?

You'll receive a callback from a specialist within an hour

Share →

Our awards

Request a callback

Your name

Your email

Your telephone number

Contact us

Please feel free to discuss your own position and concerns. Contact your nearest office on:

T: 020 3397 3603
E: enquiries@redmans.co.uk
W: www.redmans.co.uk

Testimonials

4.68 Average

69 Reviews

Anonymous

The guidance and assistance I recently received when using Redman's was fantastic. Caroline & Chris were both very informative and understanding walking me through each step. Thank you.

Posted 1 day ago

Nicola W

Fantastic service, very quick and efficient. Thank you

Posted 1 day ago

Anonymous

Excellent professional service.

Posted 1 day ago

Anonymous

As with All solicitors advice without consequence but understood and communicated my legal position

Posted 1 week ago

Anonymous

Prompt, professional and excellent service.

Posted 1 week ago

Dominic C

Excellent service, prompt and helpful

Posted 2 weeks ago

Anonymous

I found Redman’s to be very efficient and got me the best deal available in the short time scale that was available.

Posted 2 weeks ago

Victor L

Very professional. Provided excellent advice on my Settlement agreement.

Posted 2 weeks ago

Anonymous

Professional from start to finish.

Posted 2 weeks ago

Oliver W

Excellent service provided by Redmans, will certainly consider using again.

Posted 2 weeks ago

Melanie H

Very professional and extremely personable service. Thank you very much.

Posted 1 month ago

Anonymous

I found Chris to be very approachable and easy to speak with about complex matters. He took action quickly and his updates to me, as his client, were prompt. I would recommend Chris and the team at Redmans without hesitation.

Posted 1 month ago

Anonymous

Good advice

Posted 1 month ago

Anonymous

Overall happy with the service provided by Chris and Rana.

Posted 1 month ago

Anonymous

Chris and Rana provide a great service, very informed, diligent and care about your result, would recommend Redmans

Posted 1 month ago

David W

A speedy efficient friendly service, I would definitely recommend Redmans Solicitors for processing Settlement Agreements.

Posted 1 month ago

Anonymous

Both Rana and Chris were fantastic. From the first phone call I was confident my matter was in good hands. I was not disappointed. I would highly recommend Redmans. Thank you again for all of your support and advice.

Posted 1 month ago

Federico S

Great advices and communication. Through Redmana I obtained match more than what I thought. Highly recommended

Posted 1 month ago

Tom G

A good and efficient service with the required legal advice provided for a settlement agreement.

Posted 1 month ago

Francis T

The solicitor I used was Chris Hadrill, who I found extremely professional and I felt that he made me feel at ease, considering the subject matter he was assisting me with.

Posted 1 month ago

Anonymous

Chris provided excellent assistance with the negotiation of my settlement agreement. From start to finish, I was consitently updated and advised on the best course of action to take. I would highly recommend Chris and Redmans Solicitors.

Posted 1 month ago