What are a director’s duties? A practical overview for company directors

Directors manage and oversee a company’s affairs and must make decisions responsibly.

The general duties in sections 171 to 177 of the Companies Act 2006 (the CA 2006) are owed by directors to the company. These rules apply to directors of companies limited by shares and companies limited by guarantee and govern how directors use their powers, make decisions, handle conflicts and respond to financial difficulty.

What are the seven general duties?

1 – Act within powers- s.171 of the CA 2006

A director must follow the company’s constitution and use their powers only for the purposes for which they were given. Before making a significant decision, a director should check the company’s articles of association (articles), relevant agreements, previous resolutions and any limits on delegated authority.

2 – Promote the success of the company- s.172 of the CA 2006

A director must act in good faith in the way they consider most likely to promote the company’s success for the benefit of its members as a whole. This may involve considering the long-term consequences of decisions and fairness between members.

For a company limited by guarantee, success should be considered in the context of its purposes, objectives and beneficiaries, rather than simply profit.

This is key difference between being a member and being a director. A member may act solely to promote their own interests, whereas a director must act in the way they consider most likely to promote the company’s success for the benefit of all its members. A person who is both a member and director must take care to act in accordance with the relevant “hat” they are wearing at the time.

3 – Exercise independent judgment- s.173 of the CA 2006

A director may take advice, listen to members and rely on information from employees or professional advisers. However, a director must still make their own decision. A director appointed or nominated by a particular member cannot simply follow that member’s wishes without considering what is in the company’s best interests.

4 – Exercise reasonable care, skill and diligence- s.174 of the CA 2006

A director must meet the standard expected of a reasonably diligent director performing their functions, taking account of both the objective standard and their own knowledge, skill and experience. For example, a director who is a qualified accountant would be held – in relation to matters where this expertise would be relevant – to a higher standard in meeting this obligation than a director without the same expertise.

5 – Avoid conflicts of interest- s.175 of the CA 2006

A director must avoid situations in which their personal interests conflict, or may conflict, with the company’s interests. This could include a separate business the director is involved with supplying the company, involvement with a competitor or a family member benefiting from a company contract. Directors must disclose potential conflicts early and follow the correct process for authorisation.

6 – Do not accept improper third-party benefits- s.176 of the CA 2006

A director must not accept gifts, hospitality, referral payments or preferential treatment because of their position where the benefit could reasonably create a conflict.

7 – Declare interests in proposed transactions- s.177 of the CA 2006

A director must declare the nature and extent of any direct or indirect interest in a proposed transaction or arrangement with the company. A director should make the declaration promptly, ensure it is recorded and follow the articles regarding participation in discussions or voting. This is distinct from the broader duty to avoid conflicts.

What are the consequences of a breach?

Depending on the facts, a director found to be in breach of their obligations in CA 2006 may find themselves required (amongst other things) to provide compensation, an account of profits, an injunction to prevent continued breaches, or face disqualification or personal liability. Section 178 of the CA 2006 preserves the civil consequences that apply to the corresponding common-law or equitable duties; for a more detailed look into a director’s liability, please see: https://ts-p.co.uk/insights/an-overview-of-directors-duties-and-liabilities/

Identity Verification

Since 18 November 2025 directors have been required to verify their identity with Companies House.

Individuals already holding a directorship position prior to this date will need to have completed the verification by the time of their company’s next confirmation statement filing. Individuals who become new directors will need to complete the verification before their appointment.

Once their identity has been verified, individuals will be provided with an 11 character Companies House Personal Code, which will be unique to them and will need to be provided in relation to each directorship appointment they hold.

What’s the difference between a director and a member?

A member owns shares in the company, or has provided a guarantee, and will generally participate in the company’s governance by voting on matters reserved for members under the CA 2006 or the company’s articles.

One person may be both a member and a director, but the responsibilities are separate. As touched on above, company membership and directors’ general duties are different legal concepts.

Members are not involved in the company’s day-to-day management (although where a person is both a member and a director, they may be involved in the day-to-day with their director “hat” on), and their liability is generally limited to the amount already paid and any unpaid amount on their shares or the amount guaranteed. For further information on company members, please see here: https://ts-p.co.uk/insights/company-members/

If you are being appointed as a director, facing a conflict or concerned about understanding your responsibilities, Thomson Snell & Passmore can provide clear, practical advice.