If you are a law firm director you have equal duties with your fellow directors under the Companies Act, no matter whether you are considered to be a senior or junior director (equity/salaried partner); as with the SRA Code of Conduct for Firms, responsibility is joint and several.
So, as a law firm director what do you need to remember?
You are legally responsible for running your company (firm) and making sure information is sent to Companies House in a timely manner, this includes:
- The confirmation statement
- The annual accounts
- Any changes in the company’s officers or their personal details
- A change to the company’s registered address
- Allotment of shares
- Registration of mortgage charges
- Any change in the company’s people with significant control (PSC) details
You must perform your duties under the Companies Act even when (i) you are not active in the role as a director, (ii) someone else tells you what to do, (iii) you act as a director but have not been formally appointed, and (iv) you control a board of directors without being on it.
You must ensure you follow the agreed company constitution and articles of association.
You must act in the company’s best interests to promote its success, but must consider the:
- Consequences of decisions (the SRA requires such decisions and thought processes behind them to be documented)
- Interests of its employees
- Need to support business relationships with suppliers, customers and others (the non-payment of supplier invoices could fall foul of this requirement)
- Impact of its operations on the community and environment
- Company’s reputation for high standards of business conduct – SRA Principle 2 – act in a way that upholds the public trust and confidence in the solicitors’ profession and in legal services
- Need to act fairly to all members of the company – SRA Principle 5 – act with integrity
As with the SRA Codes of Conduct, you must not allow other people to control your powers; you can accept advice, but you must use your own independent judgement to make final decisions; SRA Principle 3 – act with independence.
You must perform to the best of your abilities and use any relevant knowledge, skill or experience you have; the SRA Code of Conduct for Firms requires the company to ensure that its managers and employees are competent to carry out their roles, and keep their professional knowledge and skills, as well as understanding of their legal, technical and regulatory obligations, up to date.
You must avoid situations where your loyalties might be divided, including the positions and interests of your family, to avoid possible conflicts; as with the SRA Codes of Conduct you cannot act where there is an own interest conflict, or a significant risk of such a conflict.
You must not accept benefits from a third party that are offered to you because you are a director, this could cause not just a conflict if interest but also be a breach of the Bribery Act.
You must tell your fellow directors and members if you might personally benefit from a transaction the company makes.
Other duties you must perform as a director include:
- Not misusing the company’s property
- Applying confidentiality about the company’s affairs.
You and your fellow directors must ensure you comply at all times with your obligations under both the Companies Act and the SRA Codes of Conducts, otherwise you risk sanctions that could be career ending.