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Directors’ Duties Under the Companies Act 2006: What Every Staffordshire Director Must Know

7th November 2025

Being a company director in the UK is more than a title, it’s a legal responsibility.

Under the Companies Act 2006, directors are bound by seven statutory duties designed to ensure good governance, accountability, and the long-term success of the business.

Whether you’re leading a growing SME or managing a family-run company, understanding these duties is essential to avoid costly mistakes and protect your reputation.

What Are the Seven Statutory Duties of Directors?

The Act sets out seven core obligations in Sections 171–177, and these apply to all directors, executive, non-executive, shadow, and de facto.

Here’s what you need to know:

Duty to Act Within Powers (s.171)

You must act in line with the company’s constitution and only use your powers for their proper purpose. Ignoring this can lead to decisions being overturned and personal liability.

Duty to Promote the Success of the Company (s.172)

This means acting in good faith for the benefit of members as a whole, considering:

• Long-term consequences of decisions
• Employee interests
• Supplier and customer relationships
• Community and environmental impact
• Fair treatment of shareholders

Duty to Exercise Independent Judgment (s.173)

Directors must make decisions independently, even when advice is taken, or powers are delegated.

Duty to Exercise Reasonable Care, Skill and Diligence (s.174)

You’re expected to meet both an objective standard (what a reasonably diligent person would do) and a subjective one (your actual knowledge and experience).

Duty to Avoid Conflicts of Interest (s.175)

Directors must avoid situations where personal interests clash with company interests, including external appointments or financial stakes.

Duty Not to Accept Benefits from Third Parties (s.176)

Accepting gifts or inducements that could compromise your independence are prohibited unless expressly permitted.

Duty to Declare Interest in Proposed Transactions (s.177)

Transparency is key; directors must declare any direct or indirect interest in company transactions. Failure to do so can lead to criminal liability.

What Happens If You Breach These Duties?

Breaches can result in:

• Civil remedies such as compensation or return of profits
• Disqualification for up to 15 years
• In serious cases, criminal prosecution

How Can Directors Stay Compliant?

• Keep detailed records of decisions and rationale
• Review your Articles of Association regularly
• Disclose conflicts early
• Seek professional advice when in doubt
• Stay informed about legal and governance changes

Need Advice on Directors’ Duties?

If you’re a director and want peace of mind, our Corporate and Commercial team can help you navigate your responsibilities under the Companies Act 2006.

To speak with Jen Goodwin about protecting your business, give us a call or make a quick enquiry online.