In a recent High Court case (Antuzis v DJ Houghton Catching Services Ltd), a director and company secretary were found personally liable for breaches of employment contracts, two years after the High Court ordered the company to compensate workers to the tune of £1 million to settle a modern slavery claim. This compensation was awarded due to the abhorrent working conditions, pay of less than minimum wage, the withholding of pay for reasons unknown or unexplained and the deliberate prevention of holiday and bereavement leave.
This personal liability was imposed by the court as it was believed that the directors had breached their fiduciary duties by consciously causing the company to breach the employment contracts, with complete awareness that the breaches were of statutory employment duties and that the actions were not in the best interests of either the company or the employees.
The High Court primarily considered whether the directors had acted in good faith and in a way that promoted the success of the company and exercised reasonable care, skill and diligence. This expectation is found within the Companies Act 2006 but is also a core mantra for the FCA and their code of conduct. This is a timely reminder of the statutory responsibilities of directors, which we explored in a recent article.
‘Director’ is not just a title that’s precipitously handed out, but a position that must be approached with the utmost regard to duty. There are a whole host of conduct rules, accountabilities, and statutory and regulatory obligations that must be abided by.
Under the Senior Managers and Certification Regime (SM&CR), all Senior Managers, including directors, have a Duty of Responsibility for the Senior Management Function for which they are responsible. It means that if a firm breaches FCA requirements, the Senior Manager responsible for a business area could be held personally accountable if they failed to take reasonable steps to prevent or stop a breach. Senior Managers must have their role and responsibilities clearly defined and documented in a formal Statement of Responsibilities.
Beyond its regulatory function, a Statement of Responsibilities is useful in identifying who within the firm is responsible for what and where accountabilities lie. Preparing a Statement of Responsibilities might seem like an onerous task and one that simply serves to satisfy the regulator, but by taking a step back and understanding the wider implications of being in a senior position within a company, you begin to contemplate the far-reaching repercussions of exactly what it means to be a director or a Senior Manager and what you stand to lose, personally.
The Statement of Responsibilities not only puts these duties and obligations in black and white, but serves as a constant reminder to you, the company and the regulator of what is expected of those individuals in a position of seniority – choose to ignore them and the consequences could be considerable.