The 7 statutory duties (Companies Act 2006)
The Companies Act 2006 codifies seven duties that every director of a UK company must follow. These apply to all directors — whether you run a one-person Ltd or sit on the board of a PLC.
- Duty to act within powers (s.171) — you must act in accordance with the company's constitution (articles of association) and only exercise powers for the purposes they were given.
- Duty to promote the success of the company (s.172) — you must act in good faith in the way most likely to promote the success of the company for the benefit of its members (shareholders) as a whole. This includes considering the long-term consequences of decisions, the interests of employees, relationships with suppliers and customers, impact on the community and environment, and maintaining a reputation for high standards of business conduct.
- Duty to exercise independent judgment (s.173) — you must not simply defer to others. While you can take advice, the final decision must be your own.
- Duty to exercise reasonable care, skill and diligence (s.174) — you are held to the standard of a reasonably diligent person with your general knowledge, skill and experience, plus any additional expertise you actually have.
- Duty to avoid conflicts of interest (s.175) — you must avoid situations where your personal interests conflict with the company's. This includes business opportunities you become aware of through your directorship.
- Duty not to accept benefits from third parties (s.176) — you cannot accept gifts or other benefits from third parties that are given because of your position as director.
- Duty to declare interests in transactions (s.177) — if you have a personal interest in a transaction the company is entering into, you must declare it to the other directors.
Filing obligations
As a director, you are personally responsible for ensuring the company meets its filing deadlines:
| Filing | Deadline | Late penalty |
|---|---|---|
| Annual accounts | 9 months after accounting period end | £150 — £1,500 |
| Confirmation statement | Within 14 days of review period end | Potential strike off |
| Corporation Tax return (CT600) | 12 months after accounting period | £100 — £1,600+ |
| Corporation Tax payment | 9 months + 1 day after period end | Interest + surcharge |
| VAT returns (if registered) | 1 month + 7 days after quarter end | Surcharge regime |
Read our annual accounts guide for detail on what needs filing with Companies House.
Personal liability risks
Limited liability protects your personal assets in most cases, but directors can be held personally liable if they:
- Trade while insolvent — if you allow the company to continue trading when it cannot pay its debts, you can be held personally responsible for those debts (wrongful trading under the Insolvency Act 1986).
- Give personal guarantees — banks and landlords often require directors of small companies to personally guarantee loans or leases. This bypasses limited liability entirely.
- Commit fraud — fraudulent trading carries unlimited personal liability and potential criminal prosecution.
- Breach statutory duties — courts can order directors to compensate the company for losses caused by breaching the seven duties above.
- Owe HMRC — in certain cases (particularly around PAYE and VAT), HMRC can pursue directors personally.
Director disqualification
The Insolvency Service can apply to have directors disqualified for between 2 and 15 years. Common reasons include persistent failure to file accounts, allowing a company to trade to the detriment of creditors, and fraudulent behaviour. A disqualified director cannot act as a director of any company or be involved in company management without court permission.
You can search any company on BizLookup to see the current directors and their appointment history.
Appointing and removing directors
Directors are appointed by the shareholders (or by existing directors if the articles allow). To appoint a new director, file form AP01 (individual) or AP02 (corporate) with Companies House. To remove a director, shareholders pass an ordinary resolution (more than 50% of votes) and file form TM01. The director being removed has the right to speak at the meeting where the vote takes place.
Director's insurance
Directors' and Officers' (D&O) insurancecovers legal costs and damages if a director is sued for decisions made in their capacity as director. For small Ltd companies, this typically costs £100-500 per year and is worth serious consideration if you have employees, significant contracts, or operate in a regulated industry.
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