Directors' duties—nature, scope, interpretation and application
Directors' duties—nature, scope, interpretation and application

The following Corporate practice note provides comprehensive and up to date legal information covering:

  • Directors' duties—nature, scope, interpretation and application
  • Other duties of directors
  • Interpreting the general duties
  • Applying the general duties

Directors are the agents of a company who manage its day-to-day business and owe a number of duties to it. The Companies Act 2006 (CA 2006) codified for the first time certain common law and equitable duties that had been developed by the courts over hundreds of years and also modified company law in certain areas.

CA 2006, ss 171–177 set out the statutory duties (the general duties) owed by a director to their company:

  1. the duty to act in accordance with the company's constitution and only exercise powers for the purposes for which they are conferred

  2. the duty to act in a way the director considers, in good faith, would be most likely to promote the success of the company for the benefit of its members as a whole and in doing so have regard to various matters (duty to promote the success of the company). Pursuant to the Companies (Miscellaneous Reporting) Requirements Regulations 2018, SI 2018/860, companies that have to prepare a strategic report will need to include a separately identifiable statement (section 172 statement) describing how the directors have had regard to employees and other interests when performing their duty under CA 2006, s 172 to promote the success of the company. For further details on the Companies (Miscellaneous Reporting) Requirements Regulations 2018, including the section 172 statement, see Practice Note: 2017-2019

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