So you are a Director of a Company, but are you aware of your legal obligations?

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Commercial solicitor, Nick Arthur, who is based at our office in Barnstaple, North Devon, looks at the legal obligations of a director of a limited company.

Company directors are often surprisingly uncertain about their duties and obligations. They are frequently that they effectively act as agents of the company, being appointed by the shareholders to manage the company’s affairs on a day-to-day basis.

As a general principle, the directors of a company should act together as a board. The board can however delegate powers to individual directors or to a committee.

It is important for a director to understand their legal responsibilities in order to avoid becoming personally liable.

Under the Companies Act 2006, the following are some of the duties and obligations you need to be aware of as a director to avoid incurring personal liability or even a criminal fine:-


  • You must act in good faith to promote the success of the Company. This includes both short term and long term consequences of the decisions you may make and the effect on employees and shareholders of the Company.  Consider the impact to the community and environment.


  • You must, in carrying out your duties and in making decisions, do so with reasonable care, skill and diligence to the best of your ability.


  • If the Company becomes insolvent your duties are to the creditors not the Company.


  • The Company will have Articles of Association which detail the Directors’ powers and the purpose for them. You need to be aware of them and observe those articles.


  • If you have a personal interest in a contract which the Company enters into you must declare that interest.


  • You should avoid any situation where you cannot act impartially.


  • You should not accept any benefits from third parties


For legal guidance on company and commercial issues contact solicitor Nick Arthur at our offices in Barnstaple, North Devon on 0808 139 1606 or email him direct at [email protected]