Congratulations! You have started a company, you are now what the business world calls a director, and if you are the primary decision maker you can add “managing” before director.
It is a relatively complex relationship with the world you take on, when you start a formal business, but it’s not a spider’s trap that has the intention to eat you in the end. It’s more like adopting an emotional cat, that keeps your days filled with dead mice as gifts and unconditional conditional love.
Sometimes you win and every now and then you lose, badly. However, it is well worth the experience and freedom.
So how do you handle this responsibility and where do you get help?
The short version
Get an accountant that has been around for at least 10 years. They normally have the working knowledge and systems to help, advise and keep you out of trouble. The rules a director must adhere to are extensive and can land you in hot water if ignored or “misinterpreted”.
Here is what ChatGPT says about the responsibilities of a director:
The responsibilities of a director of a small company in South Africa are generally similar to those of directors in larger companies. Directors have a fiduciary duty to act in the best interests of the company and shareholders.
The specific responsibilities of a director in a small company may include, but are not limited to, the following:
Act in Good Faith: Directors must act honestly and in good faith in the best interests of the company. They should avoid conflicts of interest and disclose any conflicts if they arise.
Compliance with the Companies Act: Directors must ensure that the company complies with the South African Companies Act and other relevant laws and regulations. This includes filing annual returns, financial statements, and any other required documents with the Companies and Intellectual Property Commission (CIPC).
Financial Oversight: Directors are responsible for the financial well-being of the company. This includes approving budgets, financial statements, and ensuring that the company maintains accurate financial records.
Risk Management: Directors are expected to identify and manage risks that may affect the company's operations. This includes financial, operational, and legal risks.
Strategic Decision-Making: Directors play a role in setting the strategic direction of the company. They may be involved in decisions related to business plans, expansion, investment, and major transactions.
Reporting: Directors must provide shareholders with accurate and timely information about the company's financial performance and operations. They are often required to report at annual general meetings (AGMs).
Compliance with the Memorandum of Incorporation (MOI): Directors must ensure that the company's MOI is adhered to and updated when necessary. The MOI outlines the rules and procedures governing the company's internal affairs.
Duty of Care: Directors are expected to exercise reasonable care, skill, and diligence in their roles. They should be knowledgeable about the company's business and make informed decisions.
Responsibility for Employees: Directors are also responsible for ensuring that the company complies with labor laws and provides a safe and fair working environment for employees.
Board Meetings: Directors must actively participate in board meetings and contribute to the decision-making process. They may be required to attend regular board meetings and committee meetings.
Record-Keeping: Directors should ensure that proper records are maintained, including minutes of meetings, resolutions, and other important documents.
Stakeholder Communication: Directors should maintain effective communication with stakeholders, which can include shareholders, employees, creditors, and regulatory bodies. It's important to note that the responsibilities of directors may vary depending on the company's specific circumstances, industry, and the company's constitution (MOI).
Directors may also have additional responsibilities, based on their individual roles within the company (e.g., managing director, financial director, etc.).
It seems evident that directors of small companies should seek legal and financial advice to ensure that they are fulfilling their responsibilities in compliance with South African law. Give me a call at 084 452 555 as soon as you feel overwhelmed and want to setup an appointment.
