ICAEW's guide to directors' duties and responsibilities
This ICAEW guide provides an overview of directors' duties and responsibilities, including on internal governance, transactions between a company and its directors or shareholders, and corporate administration. It also covers responsibilities in relation to insolvent or financially challenged companies, as well as penalties for breach of directors' responsibilities.
This guide is written for directors of private companies limited by shares with more than one director. A company of this kind is owned by its shareholders, but its board of directors is responsible for the management of the company’s business. Its directors have a special legal position as those with authority and responsibility within the company for the acts (and omissions) of the company.
It is necessary to understand what is meant by “company” and “director” to put the responsibilities in context. We provide background information on these terms and on the sources of company law, shareholders and company constitutions in the ‘what are companies and directors’ section of this guide. That section also explains how directors’ responsibilities may differ depending upon the type, size and other characteristics of a company. This guide is focused only on responsibilities that apply generally.
Other words and expressions that have a particular meaning are highlighted in the text and linked to the glossary for explanation.
The Corporate Insolvency and Governance Act 2020 has temporarily relaxed the law on directors' liability for wrongful trading in light of COVID-19 on a retrospective basis. It provides that for this purpose a Court is to assume that directors of a relevant company are not responsible for any worsening of the financial position of the company or its creditors that occurs between 1 March and 30 September 2020 or between 26 November 2020 and 30 June 2021. Nevertheless, other insolvency laws, for instance on fraudulent trading, continue in force and companies that are, or may become, insolvent should continue to consider the possible implications carefully and seek advice where appropriate.
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This is not intended to constitute legal advice. Specific legal advice should be sought before taking or refraining from taking any action in relation to the matters outlined.
Links to source material are provided for convenience only and readers should check that any such materials are up-to-date and accurate.