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Directors' responsibilities for internal governance

Directors are responsible for the internal governance (or organisation) of the company.

Collective responsibility

Directors’ powers are given to them collectively as a board and must generally, subject to any proper delegation (see below), be exercised by the board, as a whole. Directors therefore have a collective responsibility to manage the company. This is the case even if some directors are given special responsibilities or titles (eg, “finance director” or “chief executive officer”) and regardless of any distinction between executive or non-executive directors. The constitution will govern how the directors are to proceed, eg, usually that a majority vote will prevail.  

Delegation of tasks

The constitution may authorise directors to delegate the exercise of their powers to a committee consisting of one or more directors, or to a managing director, or other executive director. However, this does not absolve directors of all their responsibility for the management of the company. The company may also appoint others to act or undertake particular actions (eg, company employees) or to undertake a wide class of activities (eg, persons employed as managers). However, similarly, this does not relieve the directors of their ultimate responsibility. Practical considerations on internal governance may vary according to the characteristics of the company. For instance, directors of smaller companies may be more fully involved in day-to-day activities than those of larger companies and so may not delegate substantial functions to the same extent. 

Board composition

Directors should consider whether the board as a whole has the requisite skills and experience to fulfill its responsibilities.

Corporate governance codes

Directors of very large private companies must report on their corporate governance arrangements. They may adopt the corporate governance code known as the Wates Corporate Governance Principles.

Optional appointment of company secretary

Private companies are not required to appoint a company secretary, but may do so. A secretary is an officer of the company but does not have specific statutory responsibilities. Where one is appointed, their delegated responsibilities are determined by the directors and are usually in relation to such matters as corporate records and Companies House filings. As ever, such delegation does not remove the directors’ ultimate responsibility for such matters.

For other sections of this guide, please see below: