What are a director’s duties?

The role and responsibilities of directors in relation to the Companies Act 2006.

Uncle Ben once said to a young Peter Parker, with great [directorial] power comes great responsibility. We’re paraphrasing, but you get the reference. 

But being a company director means you have more responsibility and legal obligations than, say, senior managers or even founders. 

In fact, a director’s duties are laid out in the Companies Act 2006, and serve as the benchmark for their responsibility to promote and protect the interests of the company. 

Here we’ll explain the duties and responsibilities of directors and what they mean in relation to your day-to-day role. 

Duty to act within powers 

A director of a company must:

  • Act in accordance with the company's constitution.
  • Only exercise powers for the purposes for which they are conferred.

Every company has a constitution – or articles of association – which outlines the rules, objectives and procedures governing the company's operations. 

As a director, it is essential to familiarise yourself with the company's constitution and act in accordance with its provisions. 

This ensures that directors operate within the legal framework of the company, which helps maintain consistency, transparency and accountability in decision-making processes.

As such, directors have the power and authority to make decisions on behalf of the company. But these decisions must be within the boundaries of the law, the company’s articles of association, and any additional legal documents or agreements. 

Directors should only use their powers for the purposes for which they are conferred, which typically involve acting in the best interests of the company and its stakeholders. 

Duty to promote the success of the company 

A director must act in the way they consider, in good faith, would be most likely to promote the success of the company for the benefit of its members as a whole. 

In so doing, the director must have regard (among other matters) to:

  • The likely consequences of any decision in the long term.
  • The interests of the company's employees.
  • The need to foster the company's business relationships with suppliers, customers and others.
  • The impact of the company's operations on the community and the environment.
  • The desirability of the company maintaining a reputation for high standards of business conduct.
  • The need to act fairly as between members of the company.

These rules outline the broad range of considerations and responsibilities that directors must take into account when making decisions and carrying out their day-to-day responsibilities. 

This ensures that directors act in a manner that promotes the long-term success and sustainability of the company, while also considering the interests of the company’s shareholders, employees and community. 

Duty to exercise independent judgement 

Directors must exercise their powers independently, without subordinating their powers to the will of others, whether by delegation or otherwise (unless authorised by or under the company's constitution to do so).

In other words, directors cannot implement the decisions of others without the relevant authority, whether for personal benefit or to the detriment of the company. 

Duty to exercise reasonable care, skill and diligence

Under section 174, a director must exercise objective and subjective care, skill and diligence which would be exercised by a reasonably diligent person with both:

  • The general knowledge, skill and experience that may be reasonably expected of a person carrying out the functions carried out by the director in relation to the company (the objective test).
  • The general knowledge, skill and experience that the director actually has (the subjective test).

Duty to declare interest in proposed transaction or arrangement

Directors may not have an interest in a transaction or arrangement with the company unless the interest has been authorised by other members, such as directors and shareholders.


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