The uncertainty around what form any Brexit deal may take is a commercial headache for most directors when considering future business plans and how best to make contingency arrangements or implement and operate changes to continue to grow/maintain their business in an uncertain future. 

While contemplating these issues, all company directors should keep at the forefront of their minds, as key principles against which to consider whether the options available to them are the best options for their company, their overriding duty to act in the best interests of the company as a whole. 

Directors’ statutory duties are set out in the Companies Act 2006; directors should always:

Act within their powers: if any new arrangement needs to be authorised by a committee or more than one director, then the correct authorisations and consents should be obtained before any new arrangements are entered into.  Whilst a director may be authorised to negotiate a new deal in principle, if the final contract needs consent of the majority before being signed off the appropriate procedures must be followed.

Promote the success of the company as a whole: account should be taken of the long term consequences, interests of employees, maintaining a good business reputation, promoting good relationships with suppliers and customers, any impact of the company’s actions on the environment, and the need to act fairly between members’ interests. 

Exercise independent judgment: consider whether any changes will be for the overall good of the company and its members, not just the majority or certain directors or shareholders with interests in other areas of trade where the business operates.

Exercise reasonable care, skill and diligence: don’t be pressurised into signing contracts and agreeing terms which may not be beneficial in the long term.  Commercial deadlines are often key in ensuring negotiations do not drag on but time and attention should be given to reviewing any contract and ensuring the terms are properly documented and agreed, including taking independent or professional advice if required. 

Avoid conflicts of interest: ensuring the director’s interests in any other companies or suppliers or trade the company deals with is not being benefitted to the company’s detriment.

Not accept benefits from third parties: whilst many enjoy corporate perks and hospitality there can be a grey line between what may be considered a “bribe” and what may be considered client entertainment or corporate gifts to show appreciation of a loyalty from customers or suppliers. Care should be taken not to accept gifts or benefits which may be offered to directors in the hope or expectation the company will then contract with that provider. 

Declare an interest in proposed transactions or arrangements: some directors may have interests in the arrangements to be undertaken due to other business connections, shareholders, property investments etc.  Any arrangement involving a company, person, entity connected to a director should be considered carefully and the appropriate consent given (if required) to authorise the transaction. 

In a time of uncertainty around future trade costs and possible changes to relationships directors should be reviewing their company’s position in light of and with these duties at the forefront of their mind. 

If any assistance is required please contact Leilah Ashurst on 0161 819 4907 or at LAA@nexussolicitors.co.uk