C.1 Responsibilities of directors
Every director must always know their responsibilities as a director of an issuer and its conduct, business activities and development. Given the essential unitary nature of the board, non-executive directors have the same duties of care and skill and fiduciary duties as executive directors.
Newly appointed directors of an issuer should receive a comprehensive, formal and tailored induction on appointment. Subsequently they should receive any briefing and professional development necessary to ensure that they have a proper understanding of the issuer’s operations and business and are fully aware of their responsibilities under statute and common law, the GEM Listing Rules, legal and other regulatory requirements and the issuer’s business and governance policies.
The functions of non-executive directors should include:
(a) participating in board meetings to bring an independent judgement to bear on issues of strategy, policy, performance, accountability, resources, key appointments and standards of conduct;
(b) taking the lead where potential conflicts of interests arise;
(c) serving on the audit, remuneration, nomination and other governance committees, if invited; and
(d) scrutinising the issuer’s performance in achieving agreed corporate goals and objectives, and monitoring performance reporting.
The board should establish written guidelines no less exacting than the required standards of dealings (set out in rules 5.48 to 5.67) for relevant employees in respect of their dealings in the issuer’s securities. “Relevant employee” includes any employee or a director or employee of a subsidiary or holding company who, because of such office or employment, is likely to possess inside information in relation to the issuer or its securities.
All directors should participate in continuous professional development to develop and refresh their knowledge and skills. This is to ensure that their contribution to the board remains informed and relevant. The issuer should be responsible for arranging and funding suitable training, placing an appropriate emphasis on the roles, functions and duties of a listed company director.
Note: Directors should provide a record of the training they received to the issuer.
Directors should disclose to the issuer at the time of their appointments, and in a timely manner for any changes, the number and nature of offices held in public companies or organisations and other significant commitments. The identity of the public companies or organisations and an indication of the time involved should also be disclosed. The board should determine for itself how frequently this disclosure should be made.
Independent non-executive directors and other non-executive directors, as equal board members, should give the board and any committees on which they serve the benefit of their skills, expertise and varied backgrounds and qualifications through regular attendance and active participation. Generally they should also attend general meetings to gain and develop a balanced understanding of the views of shareholders.
Note: Non-executive directors’ attendance at general meetings is important. An independent non-executive director is often the chairman or a member of board committees and as such, the individual should be accountable to shareholders by being available to respond to questions and enquiries in relation to their work. Without attending general meetings, the director will not be able to develop a balanced understanding of the views of shareholders.
Independent non-executive directors and other non-executive directors should make a positive contribution to the development of the issuer’s strategy and policies through independent, constructive and informed comments.
An issuer should arrange appropriate insurance cover in respect of legal action against its directors.