Director’s duties and why they are important

Published on Jan 31, 2024

Have you been asked to sit as a director on the board of a private company or is that something you would like to do? 

The law relating to company directors’ duties is wide ranging and complicated.

The general duties of directors are set out in the Companies Act 2006 (CA 2006): to act within powers; promote the success of the company; exercise independent judgment; exercise reasonable care, skill, and diligence; avoid conflicts of interest; not to accept benefits from third parties; and to declare any interest in a proposed transaction or arrangement with the company. 

What these duties look like at board level and how they impact the operation of the company are usually different for each company. Since the directors carry the ultimate legal responsibility for a company’s management, understanding these duties inside out is important for the director and for the success of the company. 

There is also the creditor duty to act in the interests of the company’s creditors, and a general fiduciary duty to act in the company’s interests and similarly to a trustee in relation to the assets of the company. 

Directors have personal liability under CA 2006, duties under insolvency, environmental and health and safety legislation, and depending on the circumstances, liability to the company or third parties in contract and tort law. Executive directors may owe duties to the company as employees. 

It is important to consider all these duties before taking on the role of a director, especially if you are going to become one for the first time. It may be highly beneficial to have a confidential consultation with a solicitor about these duties before embarking on such an appointment. 

Please do not hesitate to contact Genevieve Mead, Senior Solicitor, Knocker & Foskett Solicitors, at g.mead@knocker-foskett.co.uk or direct telephone number 01732 748819, if you would like to obtain further information or advice about director’s duties.