Your Board needs to meet all its legal and regulatory responsibilities and is accountable to its stakeholders.
Board members are individually and collectively responsible for ensuring the social business is effectively and responsibly governed. All Board members need to be aware of their duties and responsibilities.
Financial and legal responsibility for running the company and for submitting information to Companies House on time:
- the confirmation statement
- the annual accounts
- any change in your company’s officers or their personal details
- a change to your company’s registered office
- registration of charges (mortgage).
General duties:
- to comply with the company’s Governance Document
- to act in best interest to promote the success of the company
- to apply independent judgement
- to act with reasonable care, skill and diligence
- to avoid conflict of interest
- not to accept 3rd party benefits
- confidentiality.
Further guidance
Financial and legal responsibility for running the charity and for providing information to the Charity Commission on time:
- annual report
- annual accounts
- changes in trustees
- reporting of key issues
General duties:
- ensure charity is carrying out its purposes for public benefit
- to comply with the charity’s Governing Document and the law
- to act in charity’s best interest
- to manage charity’s resources responsibly
- act with reasonable skill and care
- ensure your charity is accountable.
Further guidance
The Companies Act 2006 arranged (codified) Directors’ duties for limited companies. Although this codification doesn’t apply to Societies, the general duties set out in company law are based on common law and equitable principles. Society Directors are not obliged to follow them, but it is best practice to do so.
Directors of Registered Societies must also operate in line with& the Co-operative and Community Benefit Societies Act 2014. Directors should discharge their legal duties and responsibilities in a way which seeks to ensure that the Society remains committed to operating as a successful co-operative business in accordance with the values and principles that are set out in the International Co-operative Alliance Statement of Co-operative Identity. This is the basis of all co-operatives and serve the interests and protect the assets of the Society’s members by exercising independent and objective judgement.
Broadly there are three categories of legal duty:
- The duty of good faith
- The duty to take care
- The duty to obey the law.
An in-depth guide on the Essential Society Director is available from Co-operatives UK.
Understanding for all Board members on their roles and responsibilities
To assist all Board members to gain a better understanding of their roles and responsibilities, you should consider putting in place the following documentation:
- Board member role description
- Code of conduct for Board members
- Job roles for individual officers – Chairperson, treasurer and secretary
- An induction pack (or Board members handbook) for all new Board members providing key information about the business and their roles within it
- Conflict of Interest policy and Register of Board Members' Interests
From a practical perspective, the Board may choose to delegate some of its activity to ensure the smooth running of the social business.
Note that while the Board can delegate its authority, it cannot delegate its overall responsibility and is ultimately responsible for everything that goes on in a business.
To be effective, delegation needs to be legal, systematic and have proper oversight. Delegation can be to officers, sub-committees or paid staff and volunteers. As a minimum, you need to ensure:
- Any delegation is in line with your governing document
- The delegation is clearly documented setting out specific terms of reference (rules of operation on what they can and cannot do) for sub committees, and appropriate delegated authority documentation for staff and volunteers setting out financial limits where appropriate
- Establish a clear reporting mechanism for the Board to monitor its delegations.
Role of a Social Enterprise Director
There are a number of people involved in managing a social enterprise. For those individuals and the group of people as a whole, there are many responsibilities.
The following duties and responsibilities belong to those individuals that have subscribed to the governing document (Articles of Association) who have registered their involvement with Companies House.
The management of an enterprise is often referred to as governance as it is how the Company is “governed”.
One of the main characteristics of a social enterprise is that the social enterprise is strategically and financially managed by a number of individuals representative of the community and not one sole individual.
The following criteria applies to the board of Directors on a social enterprise:
- There has to be a minimum of three Directors (an odd number to aid decision making)
- Directors must be unrelated to each other
- Employed Directors make up the minority except in the case of co-operatives
The board of Directors is legally responsible for the overall management of the social enterprise. In law, duties include being responsible for:
- Contractual obligations, Employment law, Health and safety, Environmental law, Data protection, Safeguarding duties for example CRB checks of individuals involved, Companies House obligations, Her Majesty’s Revenue and Customs (HMRC) obligations, Financial stability.
The board of Directors are responsible for ensuring that the social objects within the Articles of Association are adhered to guaranteeing best practice and that the enterprise’s social obligations are met accordingly. They also, in law, have to govern with due diligence in line with the Directors’ responsibilities.
All individuals on the board of Directors are responsible for the social enterprise’s development. Practical responsibilities include:
- Determining the organisation’s mission and vision
- Engaging in strategic planning
- Approving and monitoring the Business Plan
- Ensuring policies/procedures are formulated
- Guaranteeing the adequacy of financial resources
- Providing effective financial oversight
- Ensuring sound risk management
- Selecting, supporting and appraising the Senior Manager
- Defining the relationship between the Board and the Staff
- Being a responsible employer
- Enhancing the organisation’s public image
- Selecting and inducting new Board members
- Carrying out a skills matrix of the board and undertaking relevant training
- Elect Directors
- Attend Annual General Meeting (AGM), Extra General Meeting (EGM)
- Good governance (ensuring the right Directors are voted onto the board and represent their views accordingly)
- Chairperson: Sets the agenda for meetings, Chairing meetings, Casting second vote if required (can be written into the governing document), Agenda planning, Representing the social enterprise, Senior staff liaison, Forefront of the organisation, Senior contact for funding applications and / or contract work
- Company Secretary: Companies House duties, Arranging meetings and inviting Directors, Submission of annual returns, Submission of annual accounts, Records of meetings, New Directors registrations, Resigning Directors notifications, Her Majesty’s Revenue and Customers (HMRC) duties, Submission of annual accounts · Submission of Corporation Tax return
- Treasurer: Financial overview, Cheque signatory, Finance staff liaison, Liaison with accountant, Completion of annual accounts, Liabilities and Accountability
The Directors must ensure that the enterprise operates according to the rules set out in the governing document (Articles of Association). The Directors vote on appropriate decisions which are recorded at board meetings.
The Directors are liable for submission of Companies House documentation. This could mean being prosecuted for illegal trading if the returns are late enough for Companies House to strike the social enterprise off the register.
The Directors are liable for submission of Corporation tax returns. If late you might get fined.
The Directors must ensure there are adequate financial resources.
The interests of the members and community have to be taken into account when taking decisions.
The Directors must ensure there is no conflict of interest when decisions are being made.