Boards and managers are expected to navigate far more regulatory demands than in the past. Alongside severe penalties for health and safety breaches, directors now face potential criminal sanctions for breaches of their good faith employment duty.
"It is tempting to let compliance take a back seat. But today this is simply too risky."
Peter Watts QC
Directors and Managers Law Made Easy
Directors and Managers Law Made Easy provides straightforward and practical guidance on the law that is relevant to the daily operations of an organisation from a director’s perspective. Available on subscription, the guide provides:
Gifts are only permitted if the directors believe it is in the company’s best interests. Directors should always think about whether the gift could benefit the company. If there’s no clear benefit then the gift shouldn’t be made. If a gift is made, directors should record their reasons for the belief that it is in the company’s best interests.
With Dacreed's online compliance training you can train directors, managers and staff on their compliance obligations to help protect you and your business from prosecution. Once completed, the training also enables you to demonstrate a lower risk profile to insurers. This results in lower premiums – saving you and your business money.
It is acceptable to take risks, even high risks, provided that they are justified and in the company’s best interests. Risks are generally justified as long as the directors have a reasonable expectation that the company will still be able to continue to meet its obligations.
Reckless trading is where a director creates a substantial risk of serious loss to creditors. As a general guide, a substantial risk is generally any risk that has more than a 25% chance of occurring. There may be circumstances where a less than 25% chance is also a substantial risk, but a less than 10% chance would generally be considered negligible (and therefore not a substantial risk).
Directors must exercise care, diligence and skill when making decisions. But what does this actually mean? Here are steps you can take:
You may be held to a higher standard of care, diligence and skill if you have special skills. For example, a CFO is likely to be held to a higher standard of care in relation to the company’s accounts and financial management.
If a company runs into financial trouble, directors need to think particularly carefully before making any risky decisions. If a company is nearing insolvency, directors should take into account creditors’ interests. Directors should engage with creditors as early as possible to see if any arrangements can be made to restructure debt or defer repayments.
The Health and Safety at Work Act 2015 imposes new obligations on “officers” to exercise due diligence. All directors and some senior executives are deemed to be “officers” under the Act.
Officers must exercise due diligence so that the business can ensure the health and safety of workers. Officers should put in place processes for complying with obligations and stay informed about operational risks. They should also ensure the business has necessary resources to ensure the wellbeing and safety of workers.