The duties of a company director

Becoming a director of a UK limited company is easy. It takes consent, an identity check and a filing at Companies House. You will receive a “Congratulations on becoming a director” letter from Companies House after your appointment, but it only gives a high-level overview of your new responsibilities. This article sets out what those duties are and what they mean in practice.

A director has personal legal duties, and they apply whether you are paid or unpaid, and whether you live in the UK or not.

Who the duties are owed to

A director’s duties are owed to the company, not to the shareholders or members individually, and not to whoever nominated or appointed you. This matters most where a director is put on a board by a parent company, an investor, a funder or a membership body. You can listen to their views, but your legal obligations are to the company you sit on the board of and you must act in its best interest.

The duties also apply to people who act as directors without being formally appointed (de facto directors). In many cases they also apply to people whose instructions the board is accustomed to follow (shadow directors). It is best to identify these individuals and formally appoint them as directors to avoid any later issues.

The seven general duties

The Companies Act 2006 sets out seven general duties in sections 171 to 177.

Duty	What it means in practice
Act within powers (s171)	Follow the company’s constitution (usually its articles of association) and use your powers only for the purposes they were given.
Promote the success of the company (s172)	Act in the way you consider, in good faith, most likely to promote the success of the company for the benefit of its members as a whole, having regard to the factors listed below.
Exercise independent judgment (s173)	Make your own decisions. You can take advice and take others’ views into account, but you must not simply do what someone else tells you.
Exercise reasonable care, skill and diligence (s174)	Meet the standard of a reasonably diligent person with the general knowledge, skill and experience expected of someone in your role, and the knowledge, skill and experience you actually have.
Avoid conflicts of interest (s175)	Avoid situations where your interests conflict, or may conflict, with the company’s, unless the conflict has been properly authorised.
Not accept benefits from third parties (s176)	Do not accept a benefit given to you because you are a director, or because of something you do or don’t do as a director, unless accepting it cannot reasonably be regarded as likely to give rise to a conflict of interest.
Declare interests in proposed transactions (s177)	Tell the other directors about any direct or indirect interest you have in a proposed transaction or arrangement with the company, before the company enters into it.

Promoting the success of the company

Section 172 is the duty people most often refer to. This is not simply a duty to make as much profit as possible at any cost. When deciding what will promote the company’s success, a director must consider:

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

For most companies, “success” means long-term value for the members. Where a company exists for other purposes, for example a not-for-profit company limited by guarantee, success means achieving those purposes as laid out in the articles of association.

Care, skill and diligence

The standard in section 174 has two parts. There is a minimum standard: what a reasonable person in your role would know and do. There is also a higher standard for people who have relevant qualifications or experience. For example if you are a qualified accountant, you will be expected to exercise the care, skill and diligence that you would exercise professionally in that role.

Being inexperienced, uninterested or absent is not a defence. Non-executive directors are held to this standard too. You can get help from your fellow directors, or from professional advisers such as your bookkeeper, accountant, or solicitor to ensure that you are meeting this standard.

Conflicts of interest

A conflict can arise without any transaction. Examples are sitting on the board of a competitor, a customer or a supplier, or taking up an opportunity that the company could have taken. Under section 175, conflicts in a private company can usually be authorised by the other directors, unless the articles say otherwise. Articles often also authorise particular, expected conflicts in advance, so that each occurrence does not have to be handled on a case-by-case basis.

Section 177 deals with interests in proposed transactions, such as the company contracting with a director’s own business. The interest must be declared before the company enters into the transaction. It can be declared at a board meeting or by written notice. A declaration isn’t needed where the interest cannot reasonably be regarded as likely to give rise to a conflict, or where the other directors already know about it. Section 182 requires a similar declaration for transactions the company has already entered into, for example if a supplier’s board member joins the board of the customer.

Other obligations

The seven general duties are not the whole picture. Directors are also responsible for the following:

• Filing and records. Directors must make sure the company:

  • files its confirmation statement and annual accounts on time;
  • notifies Companies House of changes, such as directors, registered office and people with significant control;
  • keeps its statutory registers up to date;
  • files corporation tax returns and pays its tax.

  Late accounts bring automatic penalties. Persistent failure to file can lead to the company being struck off.

• Identity verification. Since 18 November 2025, new directors must verify their identity with Companies House before they can be appointed. Existing directors have had to verify during the transition period, by the date of their company’s next confirmation statement.

• Insolvency. When a company is insolvent, or likely to become insolvent, directors must give priority to the interests of its creditors. If a director continues trading when they knew, or ought to have concluded, that there was no reasonable prospect of avoiding insolvent liquidation or administration, a court can order them to contribute personally to the company’s assets. This is known as wrongful trading. Fraudulent trading carries both civil and criminal liability.

• Disqualification. Under the Company Directors Disqualification Act 1986, serious failures can lead to disqualification from acting as a director, or being involved in managing a company, for up to 15 years. Examples include unfit conduct in an insolvent company, persistent filing defaults and fraud. Acting while disqualified is a criminal offence.

• Health and safety, employment, data protection and tax. Much other legislation places duties on the company, and in some cases on its directors personally, where an offence is committed with their consent or connivance, or is attributable to their neglect.

What happens if a director breaches their duties

The duties are enforceable by the company. The remedies may include:

• compensation for loss;
• handing over any profit made;
• setting aside transactions; and
• injunctions.

Practical steps

• Read the articles. They set out your powers, how decisions are made, and which conflicts are authorised.
• Keep minutes. A clear record of what was considered, and why, is the best evidence that you met the section 172 and 174 standards.
• Declare interests early and in writing, and keep a register of interests.
• Know the filing deadlines, or make sure someone reliable like your bookkeeper, is tracking them for you.
• Watch cash flow. Knowing the company’s financial position is the best protection against the insolvency rules.
• Consider directors insurance. Directors’ and officers’ insurance can cover defence costs and some liabilities. The company can pay for it, but it can’t indemnify a director against every liability.

Many of the obligations above come down to keeping accurate records and meeting deadlines, and that is where we can help. SR2 Professional Services is an Authorised Corporate Service Provider, so we can verify your identity for Companies House, incorporate your company, and provide a registered office address in Scotland. After that, we can keep your books and file your VAT returns, confirmation statements, annual accounts and corporation tax returns on time. We can also run payroll for UK-resident employees.

Up-to-date management figures let you see the company’s financial position when you’re making decisions, which matters most when times are hard and helps you grow when times are good. We don’t give legal advice, but where a question needs a solicitor, or a tax specialist, we’ll help you find the right one. Get in touch to find out more.

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This post is general information about UK company law, not legal advice. If you have a specific question about your duties as a director, speak to a professional adviser.