Directors FAQs

When will the new requirement for each company to have at least one director who is a natural person take effect?
When does the ban on child directors take effect?
Can we have more guidance on new directors’ duties?
Do we need to keep more detailed records of board meetings?
Which sections of Part 10 are the “provisions relating to directors’ conflict of interest duties” that were implemented on 1 October 2008?
What if a company has agreed to fund a director’s legal costs under section 337A of the 1985 Act? What will happen if the case is still running after commencement?
What if a company has made a loan to a director under the 1985 Act that needs approval under the 2006 Act?
What if a company makes a loan to a director before commencement that would be allowed under the 2006 Act but is prohibited by the 1985 Act?
My company wants to make a loan (or other transaction) to a director that will require approval under the new rules in Chapter 4 of Part 10. Can we pass the resolution before commencement date?
How will the new rule about corporate directors affect existing companies?
Which companies can take advantage of the new procedure in section 175 for disinterested directors to authorise conflicts of interest?

When will the new requirement for each company to have at least one director who is a natural person take effect?

This requirement came into force on 1 October 2008. But there will be a grace period until 1 October 2010 for any company which did not have at least one director who was a natural person at the time when the 2006 Act received Royal Assent (8 November 2006).

When does the ban on child directors take effect?

This requirement came into force on 1 October 2008. This means that from that day a natural person will have to be at least 16 years old in order to be a director and also that anyone who is not yet 16 who was previously a director will no longer be so.

Can we have more guidance on new directors’ duties?

The Department has published on this website a structured collection of helpful quotations from ministerial statements made during the Parliamentary debates on the Bill. http://www.bis.gov.uk/files/file40139.pdf . And the explanatory notes on the Act are available on the OPSI website: www.opsi.gov.uk/acts/en2006/2006en46.htm A growing number of publishers are producing textbooks on the new Act. The Department has no plans to produce any further guidance.

Do we need to keep more detailed records of board meetings?

It is up to each company to decide what records to keep. There is no new requirement in the Act to keep more detailed records.

Which sections of Part 10 are the “provisions relating to directors’ conflict of interest duties” that were implemented on 1 October 2008?

The following sections related to directors’ conflict of interests were implemented on 1 October 2008

• Section 175 – Duty to avoid conflicts of interest
• Section 176 – Duty not to accept benefits from third parties
• Section 177 – Duty to declare interest in proposed transaction or arrangement
• Section 180(1) to (3) and (4)(b) – Consent, approval or authorisation of members
• Section 181(2) and (3) – Modification of certain provisions in relation to charitable companies
• Chapter 3 of Part 10 (ss182 to 187) Declaration of interest in existing transaction or arrangement

What if a company has agreed to fund a director’s legal costs under section 337A of the 1985 Act? What will happen if the case is still running after commencement?

If before commencement a company has agreed to provide funds to a director for legal proceedings under section 337A (Funding of director’s expenditure on defending proceedings), the company will be able to fulfil that agreement, even after commencement date.

What if a company has made a loan to a director under the 1985 Act that needs approval under the 2006 Act?

A very few types of loan that are permitted under the 1985 Act will newly require approval under the 2006 Act. If a company has properly made such a loan before 1 October 2007, it will not need to get approval afterwards. In general, transactions entered into before commencement will continue to be governed by the pre-commencement law.

What if a company makes a loan to a director before commencement that would be allowed under the 2006 Act but is prohibited by the 1985 Act?

The 1985 Act prohibitions continue in force until 30 September 2007. There is no provision that allows companies to anticipate the relaxation in the rules.

My company wants to make a loan (or other transaction) to a director that will require approval under the new rules in Chapter 4 of Part 10. Can we pass the resolution before commencement date?

Yes. In general, where there are requirements for resolutions in the 2006 Act, a resolution passed before commencement of the requirement will be effective, provided it complies with the new rules.

How will the new rule about corporate directors affect existing companies?

From 1 October 2008, every company is required to have at least one director who is a human being excepting only those companies that on the day the Companies Act 2006 received Royal Assent, ie 8 November 2006, were fully compliant with the requirement to have directors and [which] only had corporate directors on that date.

Which companies can take advantage of the new procedure in section 175 for disinterested directors to authorise conflicts of interest?

The directors of any private company formed from October 2008 will be able to authorise conflicts in this way. New public companies will be able to if their articles specifically provide that they can. Existing companies, public and private, will be able to choose to enable their directors to authorise conflict. For these companies, a decision of the members will be required. The details will be set out in the fifth Commencement Order, which we are aiming to lay in draft before Parliament before Christmas.

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