What are the legal responsibilities for directors?
The Companies Act 2006 sets out seven statutory duties of a director:
- To act within powers, and to comply with the company’s constitution.
- To act (in good faith) to promote the success of the organisation.
- To exercise independent judgment.
- To exercise reasonable care, skill and diligence.
- To avoid conflicts (or possible conflicts) of interest.
- Not to accept benefits from third parties.
- To declare any personal interests.
There are also general duties to act:
- In the interests of creditors (especially in times of financial difficulty).
- In the interests of its employees.
- With regard to the long-term consequence of any decision in mind.
- Confidentially.
- With regard to relationships with suppliers, customers and generally with its local community and the environment.
- To maintain reputation.
- To act fairly as between members of the organisation.
There are also specific duties including:
- The obligation to file information at Companies House,
- And, since provisions of the Economic Crime & Transparency Act 2023 have come into force, all new and existing directors will now have a legal obligation to verify their identity to Companies House. Please see this video for guidance here
- Not to trade whilst insolvent.
- To operate in accordance with the relevant Health and Safety regulations.
- Since directors of a charitable company are legally considered charity trustees they must comply with both the duties set out above and charity law responsibilities. Please read the next section “What are the legal responsibilities for trustees?”
