The Companies Act 2006 places a number of duties on directors to behave in a certain way when acting on behalf of a company. As these duties have certain penalties for breach, it is worth reminding ourselves of what those duties are and what they entail. There are seven of them:
The general duties are specified in sections 171 to 177 and are owed by a director of a company to the company. The act makes it clear that a person who ceases to be a director continues to be subject
(a) to the duty in section 175 (duty to avoid conflicts of interest) as regards the exploitation of any property, information or opportunity of which he became aware at a time when he was a director, and
(b) to the duty in section 176 (duty not to accept benefits from third parties) regarding things done or omitted by him before he ceased to be a director. To that extent those duties apply to a former director as to a director, subject to any necessary adaptations.
The general duties apply to shadow directors (i.e. persons who behave as a director even though they are not registered as one at Companies House).
The 7 duties
- Duty to act within powers
- Duty to promote the success of the company
- Duty to exercise independent judgement
- Duty to exercise reasonable care, skill and diligence
- Duty to avoid conflicts of interest
- Duty not to accept benefits from third parties
- Duty to declare interest in proposed transaction or arrangement
For further information please click here General duties of directors