The directors of a company have seven general duties under the Companies Act 2006 (which forms the primary source of UK company law). These duties, which are owed by the directors to the company and apply to executive and non-executive directors, are as follows:
This duty serves to limit what directors can do: they must act in accordance with the company’s constitution (its articles of association and any relevant decision or resolution of the company’s members), and they may exercise their powers only for the purpose for which those powers are conferred.
This may be considered the most important duty of a director, but it does not exclude all other considerations. In considering what would promote the success of the company for the benefit of its shareholders, the directors must also have regard to the following:
Though they may legitimately act in accordance with an agreement duly entered into by the company that restricts the directors’ discretion.
Using the general knowledge, skill and experience that may reasonably be expected of a person in the director’s position as well as the actual knowledge, skill and experience that the particular director has.
This applies particularly to the exploitation of any property, information or opportunity. However, the duty is not infringed if the situation cannot reasonably be regarded to give rise to a conflict of interest, or if the matter has been authorised by the directors. The company’s constitution may allow a director to vote on a matter in which they have an interest, provided that interest has first been declared.
Conferred by reason of their being a director or doing (or not doing) anything as a director. This duty is not infringed if the acceptance of the benefit cannot reasonably be regarded as likely to give rise to a conflict of interest. The company may include in its constitution (such as its articles of association) a provision enabling directors to receive corporate hospitality without breaching this duty.
A director must declare the nature and extent of their interest to the other directors, if they are in any way, directly or indirectly, interested in a proposed transaction or arrangement with the company. The director need not declare an interest if it cannot reasonably be regarded as likely to give rise to a conflict of interest. A director must also declare the nature and extent of any interest where they in any way, directly or indirectly, interested in a transaction or arrangement that has already been entered into by the company. It is a criminal offence, punishable by a fine, for a director not to declare an interest in an existing transaction or arrangement.