Ken Livingstone and fiduciary duty of directors
In the interests of being topical we talk about fiduciary duty today. What is it? The most synonymous word is trust. With respect to any company, the directors have a fiduciary duty towards it. They are supposed to act in its best interests – in fact, to act in its best interests is a legal duty!
We are not picking on Ken here, but his quote “I have no idea how much money my wife is earning from (Silveta Ltd)” is not a good example to any directors out there! Particularly as he is required by law to have agreed to it in this instance.
Both he and his wife are equal shareholders and joint directors of that company. As such, he has an equal duty to the company as she does. If he honestly doesn’t know how much she is earning from Silveta Ltd then, how is he acting in the company’s best interests? Answers on a postcard, please.
It is important to distinguish the company as a completely separate “being” from either him or his wife. The fact that they co-own it doesn’t mean they can do as they please (this is less strict in a partnership).
The first thing we tell any of our director clients is that he or she has a duty of care to their company – whatever the circumstances. It is not merely a vehicle to avoid tax.
To maintain balance, we point out that Ken’s prima facie tax saving measures by using a company (i.e paying corporation tax and dividends rather than PAYE and NIC) are legitimate, sensible measures and we’re sure he is a wonderful person – but he is technically breaking the law.
May the best candidate win tomorrow!