Being a company director in the UK is about much more than a job title on Companies House.
Directors are responsible for steering the company’s strategy, safeguarding its assets, and complying with a web of legal duties. If things go wrong, they can face personal liability, disqualification, and even criminal investigation in serious cases.
This guide explains, in plain English:
- What UK company directors are legally responsible for
- The seven general duties under the Companies Act 2006
- Where and how directors can become personally liable
- What can happen if those duties are breached
- Practical ways to protect yourself as a director
It is general information only and does not constitute legal advice on any specific situation.
Summary
This blog covers:
- What Does a Company Director Do?
- The Seven General Duties under the Companies Act 2006
- Other Key Responsibilities of UK Directors
- Key UK Laws Every Director Should Know
- Where Can Directors Be Personally Liable?
- What Happens If a Director Breaches Their Duties?
- Practical Ways to Protect Yourself as a Director
- How Our Solicitors Can Help
- FAQ
Read our guide below to find out more or watch the short video.
What Does a Company Director Do?
Directors are the people responsible for managing the company’s affairs and making strategic decisions on its behalf. In most UK companies, the board of directors:
- Sets the company’s strategy and direction
- Oversees finances and risk
- Makes significant decisions on contracts, borrowing, investments and staffing
- Ensures the company complies with its legal and regulatory obligations
In law, a “director” is not just someone formally listed at Companies House.
De Jure, De Facto and Shadow Directors
Under UK law:
- De jure directors are those properly appointed and registered at Companies House.
- De facto directors act as directors in practice (making decisions, representing the company) even if they have never been properly appointed.
- Shadow directors are people in accordance with whose instructions the board is accustomed to act (for example, a dominant shareholder “pulling the strings”).
The general duties in the Companies Act 2006 can apply to de facto and shadow directors as well as formally appointed ones. In other words, you may have directors’ duties (and risks) even if you are “not officially a director”.
The Seven General Duties under the Companies Act 2006
The Companies Act 2006 sets out seven core duties that every director owes to the company (not generally to individual shareholders). They are found in sections 171-177 CA 2006.
These duties largely reflect existing case law but are now codified in statute.
1. Duty to Act within Powers (Section 171)
Directors must:
- Act in accordance with the company’s constitution (usually the articles of association); and
- Only exercise powers for the purposes for which they were given.
Example: Using a share allotment power purely to dilute a particular shareholder, rather than to raise capital for the company, may be an improper use of that power.
2. Duty to Promote the Success of the Company (Section 172)
Directors must act in the way they honestly consider would be most likely to promote the success of the company for the benefit of its members as a whole. In doing so, they should have regard (among other matters) to:
- Long-term consequences of decisions
- Interests of employees
- Relationships with suppliers, customers and others
- Impact on the community and environment
- Maintaining a reputation for high standards of business conduct
- Fairness between shareholders
This duty is often central in boardroom disputes, especially where short-term interests of certain shareholders conflict with longer-term objectives.
3. Duty to Exercise Independent Judgment (Section 173)
Directors must exercise their own judgment, rather than simply following instructions from others (e.g. a parent company, majority shareholder or fellow director).
You can rely on professional advice (e.g. from lawyers or accountants), but you still need to consider it and decide for yourself.
4. Duty to Exercise Reasonable Care, Skill and Diligence (Section 174)
This duty has both:
- An objective element: the care, skill and diligence that would be exercised by a reasonably diligent person with the general knowledge, skill and experience that may reasonably be expected of a director in that role; and
- A subjective element: the care, skill and diligence that would be exercised by a reasonably diligent person with the actual knowledge, skill and experience that the director has.
In other words, a qualified finance director may be judged against a higher standard on financial issues than a lay director.
5. Duty to Avoid Conflicts of Interest (Section 175)
A director must avoid situations in which they have, or could have, an interest that conflicts (or possibly may conflict) with the interests of the company.
Common examples include:
- Exploiting commercial opportunities that properly belong to the company
- Being a director of competing companies
- Personal investments in suppliers or customers without disclosure/authorisation
Some conflicts can be authorised by the board (or shareholders) if the company’s constitution allows it, but they must be handled openly and carefully.
6. Duty Not to Accept Benefits from Third Parties (Section 176)
Directors must not accept benefits (such as gifts, hospitality or other advantages) from third parties that are given due to their position as a director or for doing (or not doing) something as a director.
This duty sits alongside the Bribery Act 2010, which creates separate criminal offences in relation to bribery.
7. Duty to Declare Interests in Proposed Transactions or Arrangements (Section 177)
If a director is in any way, directly or indirectly, interested in a proposed transaction or arrangement with the company, they must declare the nature and extent of that interest to the other directors before the company enters into it.
There are related rules (section 182) for interests in existing transactions.
Other Key Responsibilities of UK Directors
Beyond the statutory general duties, UK directors have a range of practical responsibilities that flow from company, tax and regulatory law.
Financial Reporting and Companies House Compliance
Directors are responsible for ensuring that the company:
- Prepares and files annual accounts on time
- Files an annual confirmation statement
- Notifies Companies House of changes (directors, persons with significant control, registered office, share capital, etc.)
- Maintains accurate accounting records and statutory registers (members, directors, PSCs, charges)
Failure to comply can lead to late filing penalties, criminal offences for officers in default, and, in serious cases, disqualification.
Identity Verification under the Economic Crime and Corporate Transparency Act 2023
The Economic Crime and Corporate Transparency Act 2023 (ECCTA) introduces mandatory identity verification for:
- All company directors
- People with significant control (PSCs)
- Those who file information at Companies House
From 18 November 2025, new directors will need to verify their identity on appointment, and existing directors will need to verify within a transition period (typically linked to their confirmation statement dates). Acting as a director without verification will become an offence and may lead to fines, disqualification or the company being struck off.
Directors should:
- Ensure they understand how and when to complete verification (e.g. via GOV.UK One Login or an authorised agent).
- Build these checks into their governance and onboarding processes.
Tax and Regulatory Compliance
Directors must ensure that the company complies with:
- Tax obligations (Corporation Tax, VAT, PAYE/NICs)
- Sector-specific regulation (e.g. FCA, SRA, Charity Commission, environmental regulators) where applicable
- Data protection, anti-money laundering, and anti-bribery rules
While the company is usually the primary subject of enforcement, directors can be personally pursued where breaches involve their consent, connivance or neglect.
Governance, Culture and Employees
Under section 172 CA 2006, directors must have regard to employee interests and the company’s reputation. This often translates into:
- Setting the “tone from the top” on ethics and compliance
- Reviewing HR, whistleblowing and health and safety frameworks
- Ensuring the company has appropriate policies and training in place (e.g. anti-bribery, equality, H&S)
Key UK Laws Every Director Should Know
You don’t need to be a lawyer, but you should at least recognise these:
- Companies Act 2006: Sets out the general duties of directors (sub-sections 171-177), rules on accounts, meetings, decision-making, and many other aspects of company law.
- Insolvency Act 1986: Deals with insolvency procedures and director conduct in insolvency, including wrongful trading, fraudulent trading, misfeasance, preferences and transactions at undervalue.
- Company Directors Disqualification Act 1986 (CDDA): Provides the framework for disqualification orders and undertakings where directors are found “unfit”, especially in connection with insolvency.
- Health and Safety at Work etc. Act 1974: Imposes duties on employers. Under section 37, directors and senior managers can be personally prosecuted where H&S offences are committed with their consent, connivance or attributable neglect.
- Corporate Manslaughter and Corporate Homicide Act 2007: Creates a corporate offence of corporate manslaughter/homicide where serious management failings cause a death. The offence applies to the organisation, not individuals; individuals may instead face H&S or gross negligence manslaughter charges.
- Bribery Act 2010: Creates offences of bribing and being bribed, and a corporate offence of failure to prevent bribery if adequate procedures are not in place. Senior officers can be personally liable if involved.
Economic Crime and Corporate Transparency Act 2023 (ECCTA): Introduces identity verification for directors and PSCs, new powers for Companies House, and additional corporate offences (such as failure to prevent fraud).
Where Can Directors Be Personally Liable?
While the company is a separate legal person, UK law allows personal liability for directors in a number of situations.
Financial and Insolvency-Related Liability
Under the Insolvency Act 1986, directors may face personal consequences if they:
- Wrongfully trade, continue trading when they knew or ought to have concluded there was no reasonable prospect of avoiding insolvent liquidation/administration, without taking every step to minimise losses to creditors.
- Engage in fraudulent trading, carrying on business with the intent to defraud creditors or for any fraudulent purpose.
- Misapply or misappropriate company money or property (misfeasance).
- Authorise preferences (paying some creditors ahead of others) or transactions at undervalue close to insolvency.
In such cases, a liquidator or administrator can ask the court to order directors to contribute personally to the company’s assets.
Breach of Statutory and Fiduciary Duties
If a director breaches their duties (e.g. by diverting an opportunity to themselves, or entering into a conflicting contract without proper authorisation), the company can seek:
- Compensation for loss
- An account of profits made
- Rescission (setting aside) of the transaction
- Injunctions to prevent ongoing breach
In some cases, shareholders can bring a derivative claim on the company’s behalf, with the court’s permission.
Regulatory and Criminal Liability
Directors can also face personal fines or prosecution where they:
- Are responsible for serious health and safety breaches (under HSWA 1974, particularly section 37).
- Participate in or permit bribery, fraud or money laundering.
- Falsify accounts or mislead auditors or regulators.
In the most serious cases, individual directors may be charged with gross negligence manslaughter (separately from any corporate manslaughter charge against the company).
Environmental and Sector-Specific Offences
In certain industries (e.g. waste, construction, utilities), environmental and sector regulators can pursue directors personally where they consent to, connive in, or are negligent in relation to offences.
What Happens If a Director Breaches Their Duties?
Consequences will depend on the seriousness and context, but may include:
Civil Claims by the Company (or Shareholders)
- The company can bring a claim for loss caused by breach of duty.
- In some cases, shareholders may be allowed to bring a derivative claim on the company’s behalf.
- Remedies can include:
- Damages/compensation
- Account of profits
- Setting aside transactions
- Removal from office
Disqualification under the Company Directors Disqualification Act 1986
Under the CDDA 1986, the court can disqualify a person from acting as a director (or being concerned in the management of a company) for 2 to 15 years if their conduct makes them “unfit”.
Common grounds include:
- Serious misconduct in relation to an insolvent company (e.g. trading to the detriment of creditors).
- Persistent failure to comply with filing/record-keeping obligations.
- Serious breaches of company, insolvency or competition law.
The Insolvency Service can seek disqualification orders or accept disqualification undertakings (where the director agrees not to act, without admitting liability).
Regulatory Enforcement and Prosecution
Regulators and enforcement agencies (HSE, FCA, Environment Agency, SFO, CPS, etc.) can:
- Issue fines or improvement/prohibition notices to the company;
- Prosecute directors personally where legislation permits;
- Seek confiscation of criminal property or director-related orders (e.g. under proceeds of crime legislation).
Consequences can include fines, imprisonment, and long-term reputational damage.
Practical Ways to Protect Yourself as a Director
You cannot eliminate risk, but you can manage it sensibly.
1. Understand Your Duties
- Make sure you are familiar with the seven general duties and the main laws affecting your sector.
- New or first-time directors should consider an induction or training on governance and duties.
2. Keep Proper Records
- Ensure board decisions are properly minuted, including discussion of options, risks and reasons.
- Maintain up-to-date statutory registers and accurate accounting records.
- Use a conflicts of interest register and update it regularly.
3. Declare and Manage Conflicts Early
- When in doubt, declare potential conflicts to the board and seek authorisation where appropriate.
- Avoid taking opportunities or benefits that belong properly to the company.
4. Take Insolvency Warning Signs Seriously
- Watch for indicators such as sustained cash-flow problems, mounting arrears, creditor threats or inability to pay debts as they fall due.
- If the company may be insolvent, take early professional advice and document steps taken to protect creditors; this is crucial in relation to wrongful trading risk.
5. Check Indemnities and D&O Insurance
- Review any indemnities the company provides. UK law restricts companies from indemnifying directors against certain liabilities (e.g. fines, penalties), but they can indemnify for some costs and provide D&O insurance.
- Ensure DandO insurance is appropriate for your role and sector and that you understand any exclusions.
6. Keep Up with Companies House and ECCTA Changes
- Build identity verification (ECCTA) into your governance processes.
- Monitor filing deadlines (accounts, confirmation statements) and ensure someone on the board is clearly responsible.
How Our Solicitors Can Help
Whether you are:
- A director worried about your personal exposure,
- A board or shareholder concerned about another director’s conduct, or
- A party in a dispute over alleged breach of duties,
Specialist advice can help you understand your position and make informed decisions.
Our team can:
- Review board practices and key decisions in light of the Companies Act 2006 and related legislation
- Advise on potential liability and risk, including insolvency and regulatory concerns
- Assist with resolving boardroom and shareholder disputes, including removal or disqualification issues
- Support you if you are facing investigation, claim or disqualification proceedings
We provide pragmatic, confidential advice tailored to your circumstances.
FAQ
What are the 7 duties of a company director under the Companies Act 2006?
Under sections 171-177 of the Companies Act 2006, a director must:
- Act within powers
- Promote the success of the company
- Exercise independent judgment
- Exercise reasonable care, skill and diligence
- Avoid conflicts of interest
- Not accept benefits from third parties
- Declare interests in proposed transactions or arrangements
These duties are owed to the company, not generally to individual shareholders.
Who do directors’ duties apply to?
The general duties apply to directors of UK companies, but can also catch de facto and shadow directors, those who act as directors or whose directions the board usually follows, even if they are not formally appointed.
Can I be personally liable for company debts?
Directors are not normally liable for company debts. However, personal liability can arise if, for example:
- You engage in wrongful or fraudulent trading when the company is insolvent
- You give personal guarantees
- You misapply company assets or breach your duties, causing loss to the company or creditors.
In those cases, a court may order you to contribute personally or enforce guarantee obligations.
Can non-executive directors be liable too?
Yes, non-executive directors (NEDs) owe the same general duties as executive directors. The expected standard of care, skill and diligence (section 174) takes account of each director’s role and experience, but status as a NED is not a shield from liability.
What should I do if I think another director is breaching their duties?
This can be sensitive and fact-specific, but options may include:
- Raising concerns at the board level and ensuring they are minuted
- Seeking independent legal advice on your own position and possible steps
- In serious cases, considering whether to involve shareholders, regulators or, where appropriate, using statutory remedies such as derivative claims or seeking to remove the director from office
Due to the potential personal and commercial consequences, it’s usually sensible to take advice early.
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