What are your Legal Obligations as a Company Director?

Becoming a company director can be an exciting and empowering step. Whether you’re setting up your own business or joining the board of an existing company, directorship comes with significant legal responsibilities. These obligations aren’t just box-ticking exercises — they are legally binding duties that, if breached, can result in fines, disqualification, or even personal liability.

In this post, we’ll break down your core legal responsibilities as a director under UK law, and explain what practical steps you can take to stay compliant and protect both yourself and your business.

Who Is Considered a Director?

In legal terms, a company director is someone officially registered as such at Companies House. However, the law also recognises “shadow directors” — people who act like directors or influence board decisions, even if they haven’t been formally appointed.

If you act like a director, you may be treated like one in the eyes of the law — meaning you’ll be subject to the same legal obligations.

The Seven Statutory Duties of Directors (Companies Act 2006)

Under the Companies Act 2006, directors of UK companies must adhere to seven key statutory duties:

1.           Act Within Powers

You must act in accordance with the company’s constitution (typically its Articles of Association) and only exercise powers for their proper purpose.

2.           Promote the Success of the Company

You must make decisions that benefit the company as a whole, considering factors like employee interests, environmental impact, and long-term strategy — not just short-term profits.

3.           Exercise Independent Judgment

Directors should use their own judgment and not blindly follow others. Even if you’re appointed by shareholders, your duty is to the company.  This can mean challenging other more experienced directors; something that can be hard at first, but remember that it will be you in the firing line if you don’t do so.

4.           Exercise Reasonable Care, Skill, and Diligence

You’re expected to act with the care and skill that would be expected from someone in your position — including any special expertise you bring to the role.

5.           Avoid Conflicts of Interest

You must avoid situations where your personal interests could conflict with those of the company. This includes outside business interests, family connections, and financial entanglements.

6.           Not Accept Benefits from Third Parties

You cannot accept bribes, gifts, or inducements from people or businesses who want to influence your decisions.