Director Disqualification reasons - inappropriate delegation of responsibilities

As an act, delegation is permitted and indeed necessary in the smooth running of larger organisations. A person cannot be expected to do everything in a medium to large sized company.

The Courts are however clear on this point. Whilst directors can delegate functions to other people in the management chain, such delegation does not absolve a person from a duty to supervise the discharge of the delegated function. Indeed, the responsibility, should things go wrong, rests not just with the director who delegated the task. It rests with the entire board of directors if there is one. It could constitute a director disqualification breach.

When delegating a function, role or task, a director should:-

1. Consider whether the person to whom the task or function is delegated has the appropriate skills and experience to carry out this task.
2. Ensure that the correct systems, individuals (e.g. mid-management) and structure is in place to ensure that adequate supervision of this individual is performed;
3. If necessary, depending on the seriousness and financial risk to the company, obtain the board’s approval of the tasks being delegated and who to;
4. Ensure that there is a concise record of who is doing what and the reporting procedures. Quite commonly, this type of record is a combination of the employment contract, staff manual and regular appraisals.

However, it is important to realise that at all times the directors do have to have some trust in the employees of the company, as any failures by them are ultimately the directors’ responsibilities.

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