June 2008 - Understanding your duties as a director

Although many don’t realise it, being a director of a limited company is an onerous task. As a director, you personally owe many legal duties to the company. Historically, it’s been difficult to find a clear guide to all of these duties and, although the new Companies Act 2006 compiles a list of most of the main duties, it’s incomplete.  This article is intended as explain the duties of all directors in plain English and point out what will happen if you fail in your responsibilities.

Directors’ Duties Explained

• The duty to act within the company’s powers – a director must always act in a way allowed by the company’s Articles of Association and decisions made by the Company.

• The duty to promote the success of the company – 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 the shareholders as a whole. When doing this, he must have regard to the following things:

• the likely consequences of any decision in the long term;
• the interests of the company’s employees;
• the need to foster the company’s business relationships with suppliers, customers and others;
• the impact of the company’s operations on the community and the environment;
• the desirability of the company maintaining a reputation for high standards of business conduct; and
• the need to act fairly between the members (shareholders) of the company.

This means that making the most money for shareholders (profits) should not be the only concern of a director; he must also consider these wider effects. Cousins Business Law advice is that the above checklist is gone through when making decisions at board meetings, so that all the directors can leave an audit trail to show they have considered all these matters.

‘Understanding your duties as a director’ continues on our website with a useful list and what to do to keep yourself on the right side of the law – follow this link. 

Introduction

This year sees the implementation of Energy Performance Certificates (“EPCs”) for business premises.

They affect developers, owners, landlords and tenants and there will be fines for non-compliance, as well as the potential for causing delays in property transactions. Cousins Business Law advises you to get to grips with the new requirements now so you’re not caught out later.

Background

This year, European Directive 2002/91/EC will be implemented in full for all buildings in England & Wales. The objective of this Directive is to promote the improvement of the energy performance of buildings within the Community. It was implemented over the last 12 months in relation to residential properties through the much publicised and criticised Home Information Pack regime.
For commercial properties, The Energy Performance of Buildings (Certificates and Inspections) (England and Wales) Regulations 2007 impose obligations on commercial properties to have Energy Performance Certificates (“EPCs”).

An EPC gives a building an energy efficiency rating from A to G shown in the form of a chart of the type that has become familiar to anyone buying a fridge, washing machine or new car in recent years.

Do the Regulations Affect You?

If you are involved in carrying out construction or modification works to a building, then you will be under an obligation to provide an EPC to the owner of the building.

If you are the owner of a building and are either selling the building or letting it out, then you will be under an obligation to provide an EPC to the purchaser or tenant.

If you are the tenant of a building and you are selling your lease or granting a sublease, then you will be under an obligation to provide an EPC to the assignee of your lease or your subtenant.

What buildings are affected?

A building is defined by the Regulations as “a roofed construction having walls, for which energy is used to condition the indoor climate”, so buildings with a roof but no walls, walls but no roof, or a roof and walls but neither a heating nor air conditioning system will not require an EPC.

If the property meets the definition of a building then it will be covered by the Regulations subject to certain exemptions (e.g. places of worship, temporary buildings and buildings less than 50m2).

The Regulations apply to parts of buildings, so that letting out just one floor of a building would trigger the requirement to provide an EPC.

When do the Regulations take effect?

Since 6th April 2008, an EPC has been required on the sale or renting out of larger commercial premises (total useful floor area over 10,000m2).

From 1st July 2008, an EPC is required for premises over 2,500m2.

From 1st October 2008, the requirement for an EPC will be required on the construction, sale or renting out of all other premises.

The EPC must be made available when the property is marketed for sale or to let although there are transitional provisions for properties currently on the market.

What are your responsibilities?

If you and your building are affected by the Regulations, then you have an obligation to commission an EPC at your own cost, which must be prepared by a suitably qualified assessor. One of the practical problems is likely to be the lack of sufficient assessors to carry out the inspections and failure to obtain an EPC when selling or letting out premises may result in the transaction being delayed.

An EPC is valid for 10 years, so if one has been commissioned (whether by you or someone else) within the last 10 years, this can be reused (unless the property has been modified in the meantime).

What are the penalties for failure to comply?

Failure to provide an EPC can result in a fine of between £500 and £5,000 depending on the rateable value of the property. In view of the likely cost of producing the EPC, it has been suggested that some sellers and landlords may be tempted to risk paying the fine rather than going to the time and expense of having the EPC prepared. It is likely, however, that Local Authorities (who will police the regime through their Trading Standards Officers) will also be able to require the EPC to be produced in addition to paying a fine and may have the right to impose repeat fines if the EPC is still not produced.

If you have any questions concerning EPCs, please contact Steve Petty, our specialist property lawyer on 01926 629 005 or email Steve Petty here.

Two recent decisions herald a victory for the search engines against businesses trying to uphold their trade marks.

It’s becoming increasingly common: a business bids on its competitors’ trade marks using Google Adwords or Yahoo search marketing to achieve a sponsored listing on search engines so that when people search for their competitor, their own site comes up first.

The first blow against trade mark holders was the recent case of Victor Wilson -v- Yahoo! UK Ltd & Overture Services Ltd in the High Court. Mr Wilson sold food products and had registered the community trade mark “Mr Spicy”. He complained that, when he searched on “Mr Spicy” on Yahoo, sponsored links for Sainsbury’s and PriceGrabber.co.uk came up.

The court ruled that Yahoo had not infringed Mr Wilson’s trade mark. It stated that a trade mark was to guarantee the identity of origin of goods or services and these sponsored links did not wrongly imply that Sainsbury’s or Pricerunner, far less Yahoo, were selling Mr Wilson’s goods.

The second blow was when Google changed its policy last month to allow companies to bid on a rival’s trade mark without Google entertaining any complaints. Before that, you could complain to them if your trade mark was used by a rival.

Mr Wilson represented himself at court and so there is still room for a further legal challenge.

However, as things stand, the best advice is still to register your domain name as a trade mark where possible as well as making sure your website is designed to be found by the search engines. In addition, consider your own Google or Yahoo ad campaigns bidding on your own trade mark or business name if necessary.

In the current market conditions it’s crucial to make sure that any decisions you make on your property development are the right one’s and that in your rush to sign a great deal you don’t store up problems for the future.

Cousins Business Law property expert Steve Petty has penned an essential fact sheet will some helpful hints and advice for anyone embarking on a property development.  Read the fact sheet on the Cousins Business Law website here – Property Development – Avoiding the Traps.

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