Becoming a director of a family-farming company can mean an increase in the share of profits and more control with what happens, but it also comes with more responsibility.
Company directors duties, obligations and good governance practice can some-times be overlooked while in the thick of it as a small to medium business owner.
It is not just an issue for those in the agriculture industry - but for all family-owned companies more broadly. A company director owes a fiduciary duty to the company and to the shareholders as whole. On most occasions there are no conflicts emerging from this arrangement but at times it can rear its head. The fiduciary duty that all directors hold is to act in good faith, for a proper purpose and to avoid conflicts of interest.
In a practical sense for those running the family farm this means:
- Meetings need to be formally convened between the directors, minutes need to be taken and decisions are required to be clearly documented.
- If and when conflicts of interest arise, they should be declared.
- All decisions need to be made in the best interests of the company and for the benefit of all shareholders equally.
- Delegations and role definitions should be clearly outlined, understood and maintained.
- Everyone is aware of responsibilities, exposure and liabilities as a company director in areas such as work health safety, employment laws, consumer laws and environmental laws.
- Succession planning is a topic that needs to be considered on an ongoing basis to ensure the ongoing viability of the business.
A simple approach when acting as a director, and good way to determine whether to be concered about what is being done, is to ask if how the action might be percieved by another director or a shareholder.
This article was published in The Stock Journal on Thursday 14 June 2018.