Print

This is a freeview 'At a glance' guide about directors duties and responsibilities. 

At a glance

Directors' responsibilities and duties are legally framed in three ways:

Those common law duties that have become statute are outlined in the Companies Act 2006.

Directors’ duties apply not only to executive and non-executive 'de jure' directors, but also to 'shadow', 'de facto' and 'nominee' directors.

Overview

The legal responsibilities and duties to which all directors must adhere are determined by common law, the Companies Act 2006 and by the specific constitution of the company. 

These obligations apply to all types of directors. Together with executive and non-executive directors, who are formally appointed within the company’s constitution and who are registered with the registrar of companies, also known as 'de jure' directors, are other types of directors who must abide by the regulations. These include:                       

Common law duties

There are a number of directors’ duties, which although not codified by statute, have been identified in a court of law as a duty. The more widely recognised common law duties, also known as fiduciary duties, state that directors must:

Case law

In the case of Power Adhesives Limited v Stephen James Sweeney & Others, the Court set aside the decision by a company’s directors to convert a loan into shares because it amounted to a breach of the directors’ fiduciary or common law duties under the Hastings Bass principle. The court said that:

Companies Act 2006

Those responsibilities and duties that have been codified by statute in the form of the Companies Act 2006, as set out in sections 171 to 177 are:

Each section, as outlined above, contains any number of subsections and paragraphs that help to clarify the duties.

Along with sections 171 to 176, which have a direct reference to company directors and their behaviour in regard to the management of the company, directors must also ensure that the company complies with all other aspects of company law as described in the Companies Act 2006.

Accounts and reports

Overseeing company accounts falls to a company 'officer'. In large, publicly owned firms the administrative officer is likely to be the company secretary. In small private companies, that are not legally obliged to appoint a company secretary, a director may have to assume the role of ensuring that the company complies with all the accounting requirements as described in Chapter 15 of the Companies Act 2006. The principal accounting tasks include:

Employment law

Directors are also responsible for ensuring compliance with all areas of employment law. Employment law covers a broad range of employment-related issues such as:

Failure to comply with any area of employment law may result in legal action taken against the company and the director personally.