Liability of non-executive directors: care, skill and diligence

Member resource – non-executive directors guide to avoiding court action for failure to carry out due diligence – company secretarial guidance notes and best practice guides

This guidance note is designed to help non-executive directors avoid a range of penalties – from fines, through to disqualification and imprisonment – if they fail to carry out their various duties.

Focusing particularly on the duty to exercise reasonable care, skill and diligence, the guidance covers such issues as:

  • Taking responsibility for their own on-going training and continuous development
  • Being prepared to provide independent oversight and constructive challenge
  • Insisting on receiving high-quality information
  • Making decisions objectively in the interests of the company
  • Avoiding conflicts of interest.

Prospective non-executives are also advised to undertake their own due diligence before taking on the role, satisfying themselves that the company is one in which they can have confidence, and can make a strong and value added contribution.

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