Common Law Duties
Directors’ Responsibilities and Duties
Directors have significant responsibilities and potential liabilities, making directorships an appointment to consider carefully. Directors must act in good faith, prioritizing the company’s interests over personal benefit or those of specific shareholders. Relying on others’ good faith or acting merely as a nominee does not exempt directors from liability, especially in cases of negligence or breach of duty.
The Companies Act 2014 codifies these duties, grounding them in longstanding principles of common law. Directors owe their duties to the company as a whole—not to individual shareholders. This duty includes acting with due care, skill, and diligence, considering creditors’ interests particularly in insolvency cases. Fiduciary responsibilities include using company resources only for legitimate purposes, avoiding conflicts of interest, and refraining from self-dealing without proper disclosure and approval.
Directors must disclose conflicts of interest, including in contracts where they or connected persons have an interest, to the board and maintain transparency. They are also required to act independently of personal connections and ensure transactions align with the company’s interests. Violations can lead to personal liability, and directors may be required to account for personal profits derived from their role.
In cases of personal liability, the law typically forbids indemnifying directors for breaches unless they successfully defend against claims or receive court relief for acting honestly and reasonably.