Becoming a company director is more than just a title — it’s a legal responsibility. Whether you’re actively managing the day-to-day, acting as a non-executive director, or involved behind the scenes, you have duties under the Companies Act 2006 that must be taken seriously.
Here’s a practical guide to the seven key duties every company director should understand and follow:
1️⃣ Follow the Company’s Constitution
Your first duty is to comply with the company’s constitution and articles of association — the legal documents that set out how the company should be run. Acting outside of these rules could leave you personally liable for the consequences.
2️⃣ Promote the Success of the Company
Directors must act in the best interests of the company, but this goes beyond simply aiming for profit. You are expected to consider:
- The long-term impact of decisions
- The interests of employees
- Relationships with suppliers and customers
- The community and environment
- The company’s reputation
- Fair treatment of all shareholders
⚠️ If the company becomes insolvent, your duty shifts — you must prioritise the interests of creditors over shareholders.
3️⃣ Use Your Own Independent Judgment
You can seek advice from professionals (including us), but ultimately, the responsibility for decisions lies with you. You should think independently and avoid simply following the directions of others, even fellow directors or majority shareholders.
4️⃣ Exercise Reasonable Care, Skill and Diligence
Directors are expected to carry out their role to a high standard, using both:
- The general knowledge and skill expected of someone in the position of director
- The specific expertise you personally bring (e.g. as a qualified accountant, engineer, or industry expert)
The law holds directors with specialist knowledge to a higher standard.
5️⃣ Avoid Conflicts of Interest
Directors must steer clear of situations where their personal interests — or those of family members — conflict with their duty to the company. Examples include:
- Personal financial stakes
- Competing businesses
- Using inside knowledge for personal gain
If a potential conflict exists, you must declare it to the board and follow the procedure set out in the company’s constitution. This duty applies even after you step down as a director.
6️⃣ Don’t Accept Improper Benefits
Directors must not accept gifts, perks, or hospitality from third parties if it could compromise their impartiality. Normal corporate hospitality may be fine — as long as it doesn’t create a conflict of interest or appear to influence decisions.
7️⃣ Declare Interests in Company Transactions
If you stand to personally benefit from a company transaction — for example, awarding a contract to a business owned by a relative — you must declare this interest to the board. In some cases, you may need to abstain from voting on related decisions.
✅ Other Key Responsibilities
Beyond these seven duties, directors should also:
- Maintain confidentiality
- Avoid misusing company property or information
- Act honestly and in good faith at all times
💡 Final Thought
Being a director means having a legal duty to act with care, integrity, and good judgment. Understanding these responsibilities can help you protect both the company and yourself.
If you’re unsure about any aspect of your duties, we’re here to help. A quick conversation now could save a costly problem later.
e: office@londonaccountants.co t: 0203 137 9791
Kind Regards,
The Team at London Accountant
