Under the Companies Act 2006 directors have certain duties. These duties apply to companies limited by guarantee as well as by shares.
S171 to act within their powers - to abide by the terms of the company's memorandum and articles of association and decisions made by the shareholders;
S172 to promote the success of the company - directors must continue to act in a way that benefits the shareholders as a whole, but there is now an additional list of non-exhaustive factors to which the directors must have regard. This was one of the most controversial aspects of the new legislation at the drafting stage. These factors are:
- the long term consequences of decisions
- the interests of employees
- the need to foster the company's business relationships with suppliers, customers and others
- the impact on the community and the environment
- the desire to maintain a reputation for high standards of business conduct
- the need to act fairly as between members
S173 to exercise independent judgment - directors must not fetter their discretion to act, other than pursuant to an agreement entered into by the company or in a way authorised by the company's articles
S174 to exercise reasonable care, skill and diligence - this must be exercised to the standard expected ofsomeone with the general knowledge, skill and experience reasonably expected of a person carrying out the functions of the director (the objective test) and alsothe actual knowledge, skill and experience of that particular director (the subjective test)
S175 to avoid conflicts of interest - methods for authorising such conflicts by either board or shareholder approval are also to be introduced
S176 not to accept benefits from third parties
S177 to declare an interest in a proposed transaction with the company - there are to be carve outs for matters that are not likely to give rise to a conflict of interest, or of which the directors are already aware. There will be an additional statutory obligations to declare interests in relation to existing transactions.
These general duties are owed by a director of a company to the company;
therefore, only the company can enforce these general duties. There are three
main ways in which a company limited by guarantee can take legal action against a director for
breach of duty - (a) if the board of directors decides to commence proceedings;
(b) if the liquidator or administrator following the commencement of a formal
insolvency procedure decides to commence proceedings; and (c) through an action brought by one or more members to enforce a right which is vested not in himself, but in the company.
If the directors are in breach of their duties then you, perhaps with other members can bring an action against them, not the company as a whole.
I hope this answers your question but please feel free to ask follow up questions.