Directors' duties

General duties of directors

The Companies Act 2006 (CA 2006) codifies most, but not all, of the duties imposed on directors by case law and equitable principles.

There are seven general statutory duties:

1. •

   the duty to act within their powers

2. •

   the duty to promote the success of the company for the benefit of its members as a whole

3. •

   the duty to exercise independent judgment

4. •

   the duty to exercise reasonable care, skill and diligence

5. •

   the duty to avoid conflicts of interest

6. •

   the duty not to accept benefits from third parties, and

7. •

   the duty to declare interest in a proposed arrangement or transaction

For further information, see Practice Notes:

1. •

   Directors' duties—directors' conduct: CA 2006, ss 171–174

2. •

   Directors' duties—nature, scope, interpretation and application

Duties of directors of companies in financial difficulties

When a company is financially distressed and formal insolvency proceedings become more likely, the directors’ duty to promote the company’s success pursuant to CA 2006, s 172(1) (ie to act in the interests of the members as a whole) is modified by the common law