Duties of the Directors

Understand the duties of a director of a of a UK registered entity...

As a director, you are responsible for the day-to-day management of the company and you are subject to various statutory duties that, if breached, can result in personal liability. The duties, which are set out in the Companies Act 2006, include the requirement to:

(a) act in accordance with the company’s constitution and only exercise your powers for the purpose for which they were conferred and

(b) act in a manner that you consider, in good faith, to be the most likely to promote the success of the company for the benefit of its members as a whole. When exercising this duty, you must have regard to a number of issues, including:

  • the likely consequences of any decision in the long term
  • the interests of the company's employees
  • the impact of the company's business on the community and the environment
  • the need to foster the company's business relationships with suppliers, customers and others
  • the desirability of the company maintaining a reputation for high standards of business conduct
  • the need to act fairly between members

In discharging your duties, you must also exercise:

  • reasonable skill, care and diligence and
  • independent judgement

You also have a duty to avoid a situation in which you have, or may have, a direct or indirect interest that conflicts with the interests of the company and to disclose the existence of any interest in any proposed or existing contract with the company. You also have a duty not to accept benefits from third parties if they could give rise to a conflict of interest.

In cases of actual or prospective insolvency, your duties are still owed to the company but you must act in the best interests of the creditors, rather than its shareholders.Personal liability is also imposed in certain situations for permitting an insolvent company or prospectively insolvent company to continue trading unless you can demonstrate that it is beneficial for the creditors to continue to do so.

The above is a merely a summary of a director’s duties. For a comprehensive statement, you should seek legal advice or refer to the Companies Act 2006.

Information supplied by PriceWaterhouseCoopers PWC, 1 Embankment Place, London, WC2N 6RH Contact: Mike Curran | Tel: 0207 213 8190 | e-mail or Dipan Shah | Tel: 0207 804 0685 | e-mail