What is the legal procedure to make my wife as chairman of the Company

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Anyone can become a director, with a few exceptions:

Anyone disqualified by the company’s own Articles of Association (the rules relating to the running of the company).
An undischarged bankrupt.
Someone disqualified by a court order.
The company’s auditor.
Directors don’t have to be shareholders or even employees of the company. If you do work full or part-time for the company, however, you may need to have a director’s service contract. You may need to register this, and keep a copy for inspection at the company’s registered office.

Be aware that if someone effectively acts as a director, whether or not they have the title, they may be regarded legally as a director. For example, this applies to someone, other than an expert specialist adviser, on whose advice the directors of a company are accustomed to act. This person may be viewed as a shadow director.

Duties of a director

Directors hold a position of trust on behalf of shareholders and direct the company’s operations on their behalf. They act through the Board, which usually controls company business.

The extent of the directors’ authority depends on the company’s Articles of Association. Before you become a director, take legal advice on the extent of your obligations.

As a director, you have several duties:

To act within your powers and make sure the company follows its constitution as set out in the Memorandum and Articles of Association.
To act in good faith to promote the success of the company for the benefit of its members. You must also have take into consideration employees, suppliers, customers, the environment and the community.
To carry out your duties with reasonable care and skill. Higher standards may be expected from executive directors who are responsible for an area in which they have a specialist or professional qualification.
To exercise independent judgement.
To make sure that there is no conflict of interest and duty. You must not take bribes, and must disclose any personal interests to the company. You must not divert business opportunities to yourself that ought to be available to the whole company.
To make a declaration of interest where appropriate. You may not be allowed to vote on matters if there is a conflict of interests.
Not to benefit from a third party by reason of your being a director, or by doing or not doing something.
Not to act with intent to defraud creditors or for any other fraudulent purpose.
Not to engage in wrongful trading, that is, allowing the company to carry on trading when you know (or ought to know) that it is insolvent. This can lead to personal liability.
To carry out the statutory obligations imposed by the Companies Act 2006 and other legislation.
Directors are personally liable for certain actions taken while fulfilling their duties. Several laws give rights of action against directors in their personal capacity, including:

The Insolvency Act 1986 which leads to personal liability where directors allow the company to trade wrongfully or fraudulently.
The Health and Safety at Work Act 1974.
Laws relating to the control and disposal of hazardous waste.
Non-executive directors

Some directors take a less active role in the management of a company and are known as non-executive directors. However, there is no distinction in law between directors, and all have the same duties. So if you are a non-executive director, it’s vital that you know what your fellow directors are doing and what the real state of the business is.

Position of trust

Directors must be extremely careful if they want to take advantage of an opportunity for private profit in an area of activity similar to that of the company – even if the company has rejected the particular proposition. For example, you should always take advice before buying or selling any assets from or to the company. Shareholders’ approval is needed before a director, or someone connected with the director, may acquire a substantial company asset, or vice versa.

If a director profits personally from his or her position, even if the company itself hasn’t suffered because of their action, a court can order him or her to pass on any profits made to the company.

Legal duties of directors

In a company, you may have several roles – as well as acting as a director, you may also own shares, lend the company money and guarantee loans. When there is a conflict of interests between your various roles, the courts will usually support you if you can show you have acted honestly and reasonably.

You must also provide Companies House with statutory information concerning shareholders and directors and, of course, for filing your accounts. If you don’t do this, you could be fined.

Advocate Siddhant Sharma LawRato