Directors' general duties

This guidance has been produced primarily for quoted public companies that are looking to provide directors with practical guidance on their general duties under the Companies Act 2006 (the Act). However much of the note can also be applied to private companies. It is important to note that directors will have obligations and responsibilities beyond the general statutory duties covered in this guidance.

Directors' general statutory duties

These duties are set out under sections 171–177 of the Act, with supplementary provisions set out under sections 178–182. The individual duties are not to be looked at in isolation because, as section 179 states, more than one of the general duties may apply in any given case. Directors must act in accordance with their company’s constitution and companies may, through their Articles of Association (Articles), go further than the general duties by placing more onerous requirements on their directors. However, the Articles may not dilute the duties set out in the Act except to the extent that this is permitted by sections 173, 175, 180(4) (a) and (b) and 2321.

These general duties are owed to the company, for the benefit of members as a whole; not directly to its shareholders. If a director breaches their duties, they could face civil action and, in some cases, criminal sanction. For example, section 183 makes it a criminal offence for a director to fail to comply with the requirements of section 182 (declarations of interest) and, under Part 11 of the Act, members can, in certain circumstances, bring a derivative claim against an individual director on behalf of the company. The general duties are owed by a de facto director or shadow director in the same way and to the same extent that they are owed by a properly appointed director.

This document includes:

  • The duty to act within powers
  • The duty to promote the success of the company
  • The duty to exercise independent judgment
  • The duty to exercise reasonable care, skill and diligence
  • The duty to avoid conflicts of interest
  • The duty not to accept benefits from third parties
  • The duty to declare an interest in a proposed transaction or arrangement
  • The declaration of interest in existing transaction or arrangement
  • Consequences of breach of duty
  • Section 172 reporting requirements

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