Directors' Duties Under UK Law: What You Need to Know

The Seven Statutory Duties of a UK Director

The Companies Act 2006 sets out seven general duties that every director owes to the company:

1. Duty to Act Within Powers

Directors must act in accordance with the company's constitution (its Articles of Association) and only exercise powers for the purposes for which they are given. Acting outside your constitutional powers — for example, approving an action the articles prohibit — could make you personally liable.

2. Duty to Promote the Success of the Company

Directors must act in good faith in the way they consider would be most likely to promote the success of the company for the benefit of its members (shareholders) as a whole. This requires considering the long-term consequences of decisions, the interests of employees, relationships with suppliers and customers, the community, and the environment.

3. Duty to Exercise Independent Judgement

Directors must exercise their own independent judgement. While you can take professional advice, you cannot simply delegate your decision-making to others or blindly follow another director's lead. You remain personally responsible for the decisions you make (or ratify).

4. Duty to Exercise Reasonable Care, Skill, and Diligence

Directors must apply the care, skill, and diligence that would be exercised by a reasonably diligent person with: (a) the general knowledge, skill, and experience that a person carrying out that director's functions would have; and (b) the general knowledge, skill, and experience that that particular director actually has.

In practice: if you are a professional with relevant expertise, you are held to a higher standard. Ignorance is not a defence.

5. Duty to Avoid Conflicts of Interest

Directors must avoid situations where they have — or could have — a direct or indirect interest that conflicts with the company's interests. This particularly applies to exploiting company property, information, or opportunities for personal benefit. Conflicts can sometimes be authorised by the board or shareholders.

6. Duty Not to Accept Benefits from Third Parties

Directors must not accept benefits — gifts, hospitality, or other advantages — from third parties given by reason of their being a director or doing (or not doing) anything as a director. Small, trivial benefits are generally acceptable, but anything material that could give rise to a conflict must be refused or disclosed.

7. Duty to Declare Interests in Proposed Transactions

If a director is in any way interested in a proposed or existing transaction or arrangement with the company (e.g., a contract with a company they own), they must declare the nature and extent of that interest to the other directors. This declaration should be made before the company enters into the transaction.

Administrative Duties

Beyond the statutory duties under the Companies Act, directors are also responsible for ensuring the company meets its filing obligations with Companies House and HMRC. These include:

• Filing annual accounts and a Confirmation Statement with Companies House
• Registering for Corporation Tax and filing CT600 returns with HMRC
• Registering for PAYE and VAT where applicable
• Maintaining accurate statutory registers (register of members, directors, etc.)
• Notifying Companies House of any changes to officers, address, or share structure within 14 days

Consequences of Breach

Breaching your duties as a director can result in personal liability for financial losses suffered by the company, disqualification as a director for up to 15 years, and in serious cases, criminal prosecution. The Insolvency Service actively investigates directors of failed companies and can disqualify those who traded irresponsibly or fraudulently.