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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.

General duties owed to the company Directors have seven general duties under the Companies Act 2006. Responsibilities for internal governance Directors are responsible for the internal governance (or organisation) of the company. Responsibilities for administration Directors have specific responsibilities in relation to operation of the company. Transactions with directors Specific rules apply to certain transactions between the company and its directors. Transactions with shareholders Specific rules apply to certain transactions with shareholders. Responsibilities for a company's activity The directors are ultimately responsible for the management of the company. Financial difficulty and investigations If a company is insolvent or in financial difficulty, directors have additional duties. Breach of responsibilities Directors are subject to a variety of sanctions for breach of their duties. What are companies and directors? Further explanations on company law, companies and directors.

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Disclaimer

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.