I’m a Director…what are my responsibilities?

Directors across the UK have a range of responsibilities and duties to ensure that they act in the best interest of their limited company.

What type of director am I?

• A de jure director- who has been validly appointed by the company.
• A de facto director- who, though never actually or validly appointed, assumes the role of a director.
• A shadow director is a person who has significant influence over the company affairs without formally being appointed as a director.

It is worth noting that occasionally the word or title ‘director’ is included in an individual’s job title when in fact they have not been formally appointed as a director at Companies House.

What are my duties as a director?

According to The Companies Act 2006, a director should:

• Act within the powers given to a director as set out in the company’s constitution.
• To promote the success of the company for the benefit of its members.
• To exercise independent judgment meaning a director should not be influenced when making decisions.
• To exercise reasonable care, skill, and diligence.
• To avoid conflicts of interest, whether direct or indirect (multiple directorships/ personal interests/ professional advisers)
• Not to accept benefits from third parties pursuant to the Bribery Act 2010.
• To declare interests in proposed or existing transactions.

As a director who do I have a duty to?

Directors owe their duties to the company, not generally to the shareholders or creditors.

A company will be entitled to issue a claim or seek relief from any breach of directors’ duties. However, a shareholder may be able to bring a claim against a director on behalf of the company.

If the company is insolvent, then the liquidator may bring a personal claim against a director.

What happens if I breach my director’s duties?

A director who has acted in breach of duty might face the following personal consequences:

• An action for damages
• Injunctive relief
• Setting aside of transactions, restitution, and an account of profits
• Restoration of company property held by a director
• Criminal prosecution and fine (or, rarely, imprisonment)
• Termination of director’s service contract
• Director disqualification pursuant to Company Directors Disqualification Act 1986.

Need help as a director?

It is important that if you are acting as a director, you understand your obligations, where a potential breach could occur and seek advice as to how the matter can be handled or resolved.

At Glenville Walker we have a specialist litigation team with a wealth of experience in dealing with issues regarding directors and shareholders, who are focused on creating the right solution for you and your business. Please call us on 0151 305 9650 or email hazel.walker@glenvillewalker.com for help or advice regarding your duties as a shareholder.