GC100 warns businesses on directors’ duties

The General Counsel 100 (GC100) has warned company boards not to fall foul of the new directors’ duties provisions in the Companies Act after it published new guidelines to help board decision-making.

The group has released the guidelines for directors to identify best practice so as to ensure companies do not breach the legislation, which came in to force last November.

General counsel and company secretary of Scottish & Newcastle and GC100 board member Peter Kennerley said: “We thought that, if this is going to work properly, then it’s got to be approached in a pragmatic way.

“What we’re trying to say is that, if you follow the guidelines, then you shouldn’t be criticised for flouting the law.”

Under the new law, directors still owe their duties to members as a whole – not stakeholders. To fulfil this role, directors must take six factors into account: the interests of employees; long-term consequences of the decision; community and environmental impact; fairness between members; relationships with others; and reputation.

Last year the GC100 lobbied for changes to the provisions relating to directors’ duties and shareholder remedies. The group warned that the proposals make it easier for shareholders to bring lawsuits against company directors and that this process could be abused by disgruntled shareholders and used to block takeovers.