It can often seem that the burden of legal compliance for directors is getting heavier and heavier.

The Companies Act 2006 introduced, for the first time, a statutory codification of the duties which directors owe to the companies to which they are appointed. One of these duties is that a director must act in the way he considers, in good faith, would be most likely to promote the success of the company for the benefit of its members as a whole. In doing so, he must consider, amongst other matters:

  • the likely consequences of any decision in the long term;
  • the interests of the company’s employees; and
  • the impact of the company’s operations on the community and the environment.

A delicate balancing act amongst these interests, this duty and the obligations of directors under other legislation, including, for example, The Corporate Manslaughter and Homicide Act 2007 (“the 2007 Act”) must be struck.

An organisation to which the 2007 Act applies is guilty of an offence if the way in which its activities are managed or organised both causes a person’s death and amounts to a gross breach of a relevant duty of care owed by the organisation to the deceased. The courts have the power to impose an unlimited fine on organisations guilty of such an offence and to make remedial orders. The new Health and Safety (Offences) Act 2008 increases the prospect of a jail sentence or a hefty fine for breach of health and safety offences (click here for our previous e-update of 16/01/09). These apply over and above those detailed in the 2007 Act.

The Institute of Chartered Secretaries and Administrators recently published guidance designed to help directors comply with the 2007 Act and to consider how it may affect boardroom decisions. This guidance emphasises that being a director means ultimate responsibility for the safety of employees and also contract workers, customers and volunteers. It suggests a number of steps which companies can take to minimise the risk of prosecution for corporate homicide, including:

  • introducing and enforcing compulsory health and safety guidelines
  • provision of strong and effective leadership on health and safety issues
  • appointment of a director with responsibility for health and safety, with responsibility for monitoring activities and reporting to the board
  • constant review of health and safety policies
  • always considering health and safety when making policy decisions

This follows on from earlier guidance published by the Institute of Directors and the Health and Safety Commission, "Leading Health and Safety at Work" (see http://www.hse.gov.uk/pubns/indg417.pdf )

Good corporate governance can help to minimise risk, both personal and corporate and it is never too late to consider a review of your organisations current policies and reporting structures. MacRoberts Corporate Governance Unit can provide practical, useful guidance on all of these areas and assist with minimising actual and potential risk, a subject close to every director’s heart. MacRoberts also provide advice on all aspects of health and safety law.