If you are a company director, you have legal duties under the Companies Act 2006. These duties apply to all directors of UK companies, whether you are a formally appointed director, acting as a director without formal appointment (de facto director), or someone whose directions the directors are accustomed to follow (shadow director).

Your duties are owed to the company, not to individual shareholders. The company itself can bring claims against you for breach of duty, and shareholders can bring derivative claims on the company's behalf under Part 11 of the Companies Act 2006.

Who this guidance applies to

This guidance applies to directors of companies registered in the UK, including private limited companies, public limited companies (PLCs), and limited liability partnerships (for designated members). If you manage a company but are not formally appointed as a director, you may still owe these duties as a de facto or shadow director.

Shadow directors - definition and application of duties

Definition of shadow directors and how general duties apply to them under Companies Act 2006.

A shadow director is a person in accordance with whose directions or instructions the directors of a company are accustomed to act. Shadow directors are subject to the general duties of directors to the extent those duties are capable of applying.

Definition (s.251): Person whose directions or instructions the directors are accustomed to act upon
Duties application (s.170(5)): General duties apply to shadow directors where and to the extent capable of applying
Effective date for duties: 26 May 2015 (Small Business, Enterprise and Employment Act 2015)

Exclusion 1: Person giving advice in professional capacity (lawyers, accountants)
Exclusion 2: Person giving directions in exercise of statutory function
Exclusion 3: Minister of the Crown
Parent company exclusion: Parent company excluded from shadow director rules for general duties chapter, member approval transactions, and sole member director contracts

Practical implications

Shadow director status is particularly relevant for investors, lenders, or others who exercise significant control over company boards. If their directions are routinely followed without independent board consideration, they may be treated as shadow directors and held liable for breaches of duty.

The question is whether directors are "accustomed to act" on the person's instructions - occasional influence is not sufficient.

Types of director

LIMITED COMPANY Requirement

The seven general duties under the Companies Act 2006 apply specifically to directors of limited companies (private and public). If you run your business as a sole trader or partnership, these duties do not apply to you directly, although you may still owe fiduciary duties to business partners.

For LLPs, designated members have similar responsibilities. For charities, trustees have separate duties under charity law - see our guide on charity trustee duties.

The seven general duties

The Companies Act 2006 codifies seven general duties that directors owe to the company. These duties came into force on 1 October 2007 and replaced the previous common law and equitable rules, although courts may still refer to case law when interpreting the statutory duties.

Seven general duties of company directors (CA 2006 ss.171-177)

The seven statutory duties that all company directors owe to the company under the Companies Act 2006.

The Companies Act 2006 codifies seven general duties that directors owe to the company. These duties came into force on 1 October 2007 and apply to de jure directors (formally appointed), de facto directors (acting as directors without formal appointment), and shadow directors (to the extent the duties are capable of applying).

Duty 1 - Act within powers (s.171): Act in accordance with company's constitution and only exercise powers for proper purposes
Duty 2 - Promote success (s.172): Act in good faith to promote the success of the company for benefit of members as a whole
Duty 3 - Independent judgment (s.173): Exercise independent judgment - cannot fetter discretion by agreeing to vote as directed
Duty 4 - Reasonable care, skill and diligence (s.174): Exercise care, skill and diligence of a reasonably diligent person with director's knowledge and experience
Duty 5 - Avoid conflicts of interest (s.175): Avoid situations where personal interests conflict with company interests
Duty 6 - Not accept benefits from third parties (s.176): Must not accept benefits conferred by reason of being a director
Duty 7 - Declare interest in transactions (s.177): Declare nature and extent of interest in proposed transactions to other directors

Commencement date: 1 October 2007
Applies to: All UK company directors (de jure, de facto, and shadow directors)
Duties owed to: The company (not individual shareholders)
Enforcement: Civil remedies; derivative claims by shareholders under Part 11

Fiduciary vs non-fiduciary duties

Duties 1-3 and 5-7 are fiduciary duties, enforceable through equitable remedies including account of profits, rescission, and injunction. Duty 4 (reasonable care, skill and diligence) is a duty of care, not a fiduciary duty, and is enforceable through common law damages.

Running a limited company - directors' responsibilities

Understanding each duty

Duty 1 - Act within powers (s.171)

You must act in accordance with your company's constitution (articles of association and any shareholders' agreement) and only exercise your powers for their proper purposes. This means you cannot use director powers to benefit yourself or entrench your position against the interests of the company.

Example: Issuing new shares primarily to dilute a hostile shareholder's stake, rather than to raise capital, would breach this duty.

Duty 2 - Promote success (s.172)

You must act in good faith to promote the success of the company for the benefit of its members (shareholders) as a whole. This is often called "enlightened shareholder value" because you must consider wider stakeholders when making decisions.

Section 172 duty to promote success - stakeholder considerations

The six stakeholder factors directors must have regard to under Companies Act 2006 s.172.

Section 172 of the Companies Act 2006 requires directors to act in good faith to promote the success of the company for the benefit of its members as a whole. In doing so, directors must have regard to six specific stakeholder factors. This is often called "enlightened shareholder value".

(a) Long-term consequences: The likely consequences of any decision in the long term
(b) Employee interests: The interests of the company's employees
(c) Business relationships: The need to foster business relationships with suppliers, customers and others
(d) Community and environment: The impact of the company's operations on the community and the environment
(e) Reputation: The desirability of maintaining a reputation for high standards of business conduct
(f) Fair treatment of members: The need to act fairly as between members of the company

Number of stakeholder factors: 6
Primary duty: Benefit of members (shareholders) as a whole
Nature of duty: Have regard to (consider), not balance equally
S.172 statement: Large companies must include in strategic report (reporting requirement)

Modifications to s.172

Charitable companies: Where company purposes are charitable, the duty applies to achieving those purposes instead of member benefit.

Creditor interests: Subject to any rule of law requiring directors to consider or act in the interests of creditors, particularly when the company is insolvent or approaching insolvency.

Section 172 statement reporting requirements

When making decisions, you must genuinely consider all six stakeholder factors. You do not need to balance them equally - shareholders' interests remain primary - but you cannot ignore them entirely. For significant decisions, document in board minutes which factors you considered and how they influenced your decision.

Large companies must include a section 172 statement in their strategic report, explaining how directors have had regard to these stakeholder factors.

Duty 3 - Exercise independent judgment (s.173)

You must make your own decisions and cannot simply defer to others or agree in advance to vote as directed. However, you can act in accordance with an agreement entered into by the company that restricts future exercise of discretion, provided this was properly authorised.

Example: If you were nominated to the board by an investor, you still owe your duties to the company, not to that investor. You cannot simply vote as the investor instructs without applying your own judgment.

Duty 4 - Reasonable care, skill and diligence (s.174)

You must exercise the care, skill, and diligence that would be exercised by a reasonably diligent person with both the general knowledge and experience expected of someone in your role, and any additional knowledge and skills you actually have.

This is a dual test - both objective (what any director should know) and subjective (your particular expertise). A qualified accountant serving as finance director is held to a higher standard than a non-financial director when reviewing accounts.

Duty 5 - Avoid conflicts of interest (s.175)

You must avoid situations where you have, or could have, a direct or indirect interest that conflicts with the interests of the company. This applies to the exploitation of any property, information, or opportunity, regardless of whether the company could take advantage of it.

Authorisation: Private companies can authorise conflicts through a board resolution (unless the articles prohibit this). Public companies can only authorise conflicts if their constitution expressly permits it. The interested director cannot vote on their own authorisation.

Duty 6 - Not accept benefits from third parties (s.176)

You must not accept benefits from third parties conferred by reason of your being a director or doing (or not doing) anything as director. This includes gifts, hospitality, and other benefits that could create a conflict of interest.

Minor hospitality (reasonable meals, modest gifts) is generally acceptable, but significant benefits must be disclosed and may require authorisation.

Duty 7 - Declare interest in transactions (s.177 and s.182)

If you are in any way interested in a proposed transaction with the company, you must declare the nature and extent of that interest to the other directors before the company enters into the transaction. For existing transactions, you must declare as soon as reasonably practicable after becoming aware of your interest.

Criminal offence: Failure to declare an interest in an existing transaction under s.182 is a criminal offence, punishable by an unlimited fine.

Director conflict of interest disclosure requirements

Requirements for declaring interests in transactions under Companies Act 2006 ss.177 and s.182.

Directors must declare any interest they have in transactions or arrangements with the company. The requirements differ depending on whether the transaction is proposed (s.177) or already exists (s.182). Failure to declare an interest in an existing transaction is a criminal offence.

Proposed transaction (s.177): Declare nature and extent of interest to other directors BEFORE company enters transaction
Existing transaction (s.182): Declare as soon as reasonably practicable after becoming aware of interest
Direct interest: Director personally stands to benefit or suffer
Indirect interest: Connected persons (family, associated companies) have an interest

Method 1 - At meeting: Oral declaration at directors' meeting
Method 2 - Written notice (s.184): Notice in writing given to other directors
Method 3 - General notice (s.185): Standing notice of interest in specified person/firm (covers all future transactions)
Update duty: Further declaration required if original becomes inaccurate or incomplete

Exceptions to declaration requirement

Interest cannot reasonably be regarded as likely to give rise to conflict
Other directors are already aware (or ought reasonably to be aware)
Concerns director's service contract considered at board meeting

Criminal offence: Failure to comply with s.182 (existing transactions) is an offence under s.183. Penalty on indictment is unlimited fine.

Private company - board authorisation of conflicts: Permitted unless articles prohibit (s.175)
Public company - board authorisation: Only if constitution expressly permits (s.175)
Voting on authorisation: Interested director not counted for quorum or voting

Directors' duties - conflicts of interest

Filing deadlines - your statutory responsibilities

As a director, you are personally responsible for ensuring your company meets its statutory filing obligations. Failure to file on time is a criminal offence and results in automatic late filing penalties.

Company filing deadlines - accounts and confirmation statement

Key filing deadlines for limited company annual accounts and confirmation statements with Companies House.

Directors have statutory obligations to ensure the company files its annual accounts and confirmation statement with Companies House. Failure to file on time is a criminal offence and results in automatic late filing penalties.

Annual accounts - private company: 9 months after accounting reference date
Annual accounts - public company (PLC): 6 months after accounting reference date
First accounts - private company: 21 months from date of incorporation
First accounts - public company: 18 months from date of incorporation
Confirmation statement: Within 14 days after end of review period (at least once every 12 months)

Confirmation statement fee (online): £34 (rising to £50 from 1 February 2026)
Confirmation statement fee (paper): £62
Late filing penalty (private, up to 1 month late): £150
Late filing penalty (private, 1-3 months late): £375
Late filing penalty (private, 3-6 months late): £750
Late filing penalty (private, over 6 months late): £1,500

Director responsibility

Directors are personally responsible for ensuring accounts are filed on time. Directors can be prosecuted for persistent failure to file, and this may lead to disqualification under s.3 CDDA 1986. Penalties double for public companies and if late two years in a row.

Criminal offence: Failure to file accounts - each director liable (s.451)
Maximum penalty on conviction: Unlimited fine and/or daily default fine
Compulsory strike-off: Companies House may strike off company for failure to file
Director protection: No defence to say accountant failed to prepare accounts

File your company's annual accounts

File your confirmation statement with Companies House

Company statutory registers retention

Retention requirements for company statutory registers.

Register of members: Indefinitely while company exists
Historic register: Must be retained
Storage location: Registered office or SAIL
Central register option (from November 2025): Some registers can be held on Companies House central register
Authority: Companies House

Disqualification risks

Directors who breach their duties or fail to comply with statutory requirements can be disqualified from acting as a director. A disqualification order or undertaking prevents you from being a director, receiver, or being involved in the promotion, formation, or management of any company for the disqualification period.

Acting while disqualified is a criminal offence, punishable by up to 2 years' imprisonment and personal liability for all company debts incurred during that period.

Director disqualification grounds and periods (CDDA 1986)

Grounds for director disqualification under the Company Directors Disqualification Act 1986 and disqualification periods.

The Company Directors Disqualification Act 1986 (CDDA) provides for the disqualification of persons from acting as directors or being involved in company management. A disqualified person commits a criminal offence if they act as a director during the disqualification period.

s.2 - Conviction of indictable offence: Connected with promotion, formation, management, liquidation, or striking off of a company
s.3 - Persistent breaches: Persistent failures to comply with companies legislation requiring returns, accounts or documents
s.4 - Fraud in winding up: Fraud in course of winding up, fraudulent trading, or defrauding creditors
s.5 - Summary conviction: Three or more failures to file returns/accounts in 5 years
s.6 - Unfitness (insolvent company): Conduct as director of insolvent company makes person unfit for company management
s.8 - Disqualification undertaking: Secretary of State accepts undertaking instead of court order (same effect)
s.10 - Wrongful trading: Participation in wrongful trading under Insolvency Act 1986 s.214

Minimum disqualification period (s.6): 2 years
Maximum disqualification period: 15 years
Typical period (less serious unfitness): 2-5 years
Typical period (serious unfitness): 6-10 years
Typical period (most serious cases): 11-15 years

Matters determining unfitness (Schedule 1)

For all cases: Extent of responsibility for material contraventions; extent of responsibility for causing company insolvency; frequency of conduct giving rise to proceedings; nature and extent of loss or harm caused.

For directors specifically: Misfeasance or breach of fiduciary duty; material breach of statutory director obligations; frequency of such breaches.

Effect of disqualification: Cannot be director, receiver, or involved in company promotion/formation/management
Acting while disqualified: Criminal offence - up to 2 years imprisonment and/or unlimited fine
Personal liability: Personally liable for company debts incurred while acting when disqualified
Permission to act: Court may grant leave to act as director of specified company despite disqualification

Director disqualification

Consequences of breach

If you breach your duties, the company can bring civil proceedings against you. The remedies available depend on which duty was breached:

Fiduciary breaches (duties 1-3, 5-7): Account of profits, rescission of transactions, restoration of property, equitable compensation, injunction
Negligence (duty 4): Common law damages - the company must prove your breach caused loss

Shareholders can also bring derivative claims on the company's behalf under Part 11 of the Companies Act 2006, although they need court permission to proceed.

Court relief

Under section 1157, a court can relieve you from liability if you acted honestly and reasonably and, having regard to all the circumstances, ought fairly to be excused. This is not automatic - the court retains discretion.

Ratification

Members can vote to ratify (approve) conduct amounting to breach of duty under section 239, but the interested director cannot vote on such a resolution.

Consequences of breach of directors' duties (CA 2006 s.178)

Civil and criminal consequences of breaching directors' duties under Companies Act 2006.

Section 178 provides that the consequences of breach of directors' duties (ss.171-177) are the same as would apply if the corresponding common law rule or equitable principle applied. Most breaches result in civil liability to the company, but failure to declare interests can also be a criminal offence.

Remedies for fiduciary breaches (s.171-173, 175-177): Injunction, rescission, account of profits, restoration of property, equitable compensation
Remedies for negligence breach (s.174): Common law damages (must prove breach caused loss)
Who can enforce: The company (claims belong to company, not shareholders)
Derivative claims: Shareholders may bring claims on company's behalf under Part 11 (ss.260-264)

Criminal offence - failure to declare interest (s.183): Director fails to declare interest in existing transaction under s.182
Penalty on indictment: Unlimited fine
Penalty on summary conviction: Fine up to statutory maximum

Relief and protection

Court relief (s.1157): Court may relieve director from liability if they acted honestly and reasonably and ought fairly to be excused.

Ratification (s.239): Members may ratify conduct amounting to breach, but interested director cannot vote on resolution.

Insurance (s.233): Company may purchase D&O insurance for directors against liability for negligence, default, breach of duty or breach of trust.

Void provisions (s.232): Any provision purporting to exempt director from liability is void.

Director duties - your responsibilities

Court power to grant relief to directors (CA 2006 s.1157)

Power of court to relieve directors from liability if they acted honestly and reasonably.

Section 1157 gives courts discretion to relieve directors (and other officers) from liability for negligence, default, breach of duty or breach of trust, where they have acted honestly and reasonably and ought fairly to be excused.

Applies to: Proceedings for negligence, default, breach of duty, or breach of trust
Condition 1: Director acted honestly
Condition 2: Director acted reasonably
Condition 3: Having regard to all circumstances, director ought fairly to be excused

Type of relief: Whole or partial relief from liability
Who can apply: Director (or other officer) of the company
Proactive application: Director may apply if they apprehend a claim may be made (s.1157(2))
Timing: Can be raised as defence in proceedings or applied for separately

Key considerations

All three conditions must be met. "Honest" means subjectively honest - the director believed they were doing the right thing. "Reasonable" is an objective standard - would a reasonable director have acted similarly? The court then exercises discretion on whether it is fair to excuse the director.

Relief is not automatic even if conditions are met - the court retains discretion to refuse relief if it would be unfair to the company or its creditors.

Running a limited company - directors' responsibilities

Protecting yourself as a director

Several safeguards can reduce your personal exposure to liability:

Act within your powers: Follow your company's articles and any shareholders' agreement
Document decisions: Keep clear board minutes showing the basis for decisions, especially for significant matters
Declare conflicts early: Register and update any conflicts of interest. When in doubt, declare.
Take professional advice: For complex matters, obtain appropriate legal, accounting, or other professional advice and document that you followed it
D&O insurance: Directors' and officers' liability insurance can cover legal costs and some claims. The company can purchase this under s.233.
Indemnification: The company can indemnify directors against third-party claims (but not claims by the company itself or criminal fines)

Warning: Any provision purporting to exempt a director from liability for negligence, default, breach of duty, or breach of trust is void under section 232.

Special considerations

Multiple directorships

If you are a director of multiple companies, be aware of potential conflicts between those companies' interests. Consider whether information received in one role could create a conflict in another.

Non-executive directors

Non-executive directors owe the same duties as executive directors. While they may not be involved in day-to-day management, they must still exercise independent judgment and reasonable care in their oversight role.

Nominee directors

Directors nominated by investors, lenders, or other parties owe their duties to the company, not to their nominator. You cannot simply act on instructions from the party who appointed you.

Insolvency

When a company is insolvent or approaching insolvency, directors must consider the interests of creditors, not just shareholders. The duty to promote success of the company becomes modified to include creditor interests. Wrongful trading (continuing to trade when there is no reasonable prospect of avoiding insolvent liquidation) can result in personal liability for company debts and disqualification.

Understand your company's constitution

Read your articles of association and any shareholders' agreement. These define the scope of your powers and decision-making procedures.
Maintain a register of interests

Declare any conflicts of interest to the board. Update your register when circumstances change. Keep records of authorisations granted.
Document board decisions

Keep clear minutes showing what was considered, including stakeholder factors for significant decisions. This protects you if decisions are later questioned.
Set up filing reminders

Create calendar reminders for confirmation statement and accounts filing deadlines. Consider using accountant or company secretary services to manage compliance.
Review D&O insurance

Check whether your company has directors' and officers' liability insurance. If not, propose this to the board.
Take professional advice for complex matters

For significant transactions, conflicts of interest, or financial difficulties, obtain appropriate professional advice and document it.

Primary legislation

Official guidance

Regulator guidance to help you understand your obligations.

Accountant in Bankruptcy (aib.gov.uk) (opens in new tab) Detailed Guidance GOV.UK
Capital distributions on dissolution (HMRC) (opens in new tab) Detailed Guidance GOV.UK

Business Context Testing

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Guvnor

Your duties as a company director

Who this guidance applies to

This guidance applies to limited company directors

The seven general duties

Understanding each duty

Duty 1 - Act within powers (s.171)

Duty 2 - Promote success (s.172)

Duty 3 - Exercise independent judgment (s.173)

Duty 4 - Reasonable care, skill and diligence (s.174)

Duty 5 - Avoid conflicts of interest (s.175)

Duty 6 - Not accept benefits from third parties (s.176)

Duty 7 - Declare interest in transactions (s.177 and s.182)

Filing deadlines - your statutory responsibilities

Disqualification risks

Consequences of breach

Court relief

Ratification

Protecting yourself as a director

Special considerations

Multiple directorships

Non-executive directors

Nominee directors

Insolvency

Understand your company's constitution

Maintain a register of interests

Document board decisions

Set up filing reminders

Review D&O insurance

Take professional advice for complex matters

Compliance Assistant

🧪 Business Context Testing

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Who this guidance applies to

This guidance applies to limited company directors

The seven general duties

Understanding each duty

Duty 1 - Act within powers (s.171)

Duty 2 - Promote success (s.172)

Duty 3 - Exercise independent judgment (s.173)

Duty 4 - Reasonable care, skill and diligence (s.174)

Duty 5 - Avoid conflicts of interest (s.175)

Duty 6 - Not accept benefits from third parties (s.176)

Duty 7 - Declare interest in transactions (s.177 and s.182)

Filing deadlines - your statutory responsibilities

Disqualification risks

Consequences of breach

Court relief

Ratification

Protecting yourself as a director

Special considerations

Multiple directorships

Non-executive directors

Nominee directors

Insolvency

Understand your company's constitution

Maintain a register of interests

Document board decisions

Set up filing reminders

Review D&O insurance

Take professional advice for complex matters

Related guides in Compliance & Legal

Business Context Testing

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