Can a director delegate their powers and responsibilities?

Summary  

Directors can delegate powers but must adhere to legal and statutory requirements. Delegation does not absolve directors of their ultimate responsibility. Improper delegation can lead to potential director liability. 

Summary table of do’s and don’ts 

A. Types of delegation 

There are four principal forms of delegation that directors should be aware of, each of which is examined in this article:

1. Delegation by the board of directors 
2. Delegation of a director’s personal responsibilities 
3. Delegation of authority to enter into contracts 
4. Delegation in a director’s personal capacity 

1. Delegation by the board of directors

• Delegation by the board: The board of directors of a company (Board) acts collectively to manage a company. In practice, it is inefficient for every decision to be made by the Board, so specific powers are delegated to committees, individual directors, or other persons. This delegation must be authorised by the company’s articles of association (Articles). For instance, Article 5 of the Model Articles allows the Board to delegate any of its powers to any person or committee, on any terms it sees fit.

• Statutory limitations: Some powers need to be taken by the Board and cannot be delegated to a committee, such as authorising conflicts of interest under section 175(4)(b) of the Companies Act 2006 (CA 2006).  

Key takeaway: The Board can delegate powers to committees or individuals, but must adhere to the Articles of the company, so always check the Articles to confirm what powers can be delegated and under what conditions. 

2. Delegation of personal duties/responsibilities 

Responsibilities that involve discretion, judgment, or duties requiring the director’s own skill cannot be delegated. For example, a director cannot delegate their vote on a board resolution to someone else, even under a power of attorney.  

Key takeaway: Personal responsibilities involving discretion or judgment cannot be delegated.

3. Delegation of authority to enter into contracts 

• Authority delegation: The authority to enter into contracts on behalf of the company is delegated by the company itself, not by an individual director. This can be done through express authority (e.g. a board resolution) or implied authority (based on the director’s role or past conduct).  

• Formal delegation: If a company wishes to delegate this authority formally, it may do so via a power of attorney, which must comply with section 44 of the CA 2006.  

Key takeaway: Contractual authority is delegated by the company, not individual directors.

4. Delegation in a director’s personal capacity

• Personal delegation: Directors, like any individual, can delegate personal actions (not related to their role as director) using a power of attorney. For example, they may authorise someone to sign documents on their behalf in a personal transaction.  

Key takeaway: Directors can delegate personal actions unrelated to their role using a power of attorney. 

B. Delegated but not forgotten

Even when powers are delegated, directors must exercise reasonable care, skill, and diligence. This includes overseeing those to whom they have delegated tasks. Delegation must be reasonable, and directors should: 

• Ensure the delegate is competent.  

• Clearly define the scope of delegated powers.  

• Monitor the delegate’s actions.  

•  Factors such as the company’s size, the nature of the task, and the delegate’s qualifications will influence whether the delegation was appropriate.  

Key takeaway: Directors must oversee delegated tasks to ensure compliance and effectiveness. 

Conclusion 

Delegation is key to business success and managing the workload of a director, but it must be done carefully. Directors should ensure that delegation does not lead to abdication of responsibility. For further guidance or to discuss your specific situation, please contact our corporate & commercial team for advice.