Directors’ Duties in Great Britain

>> Powers and Duties in Great Britain

Duties – skill and care

In exercising directors’ powers, you are required to exhibit ‘such a degree of skill as may reasonably be expected’ from a person with your knowledge and experience. For example, a chartered accountant might be expected to know if the company was trading while insolvent.

You must also exercise a degree of care in your actions as a company director. The test of an acceptable level of care is what a reasonable person would do in looking after their own affairs.

You are generally not liable for the actions of  your fellow directors if you knew nothing about them and took no part in them but you have a duty to make sure that you are informed about the company’s affairs – turning a blind eye is not an option.

Duties – general

As a company director, you must act in a way which you think is most likely to promote the success of the company. You need to consider the following:

  • the likely consequences of any decision in the long term
  • the interests of the company’s employees
  • the need to foster the company’s business relationships with suppliers, customers and others
  • the impact of the company’s operations on the community and the environment
  • the desirability of the company maintaining a reputation for high standards of business conduct
  • the need to act fairly as between members of the company

The directors of a company play a very important role in overseeing activities within the company, in promoting and upholding the Company’s values.

As a director, you are therefore expected to give this role the due time, attention and focus that such a responsibility requires, and to exercise your judgement with due care and consideration. In exercising directors’ powers, you are required to exhibit ‘such a degree of skill as may reasonably be expected’ from a person with your knowledge and experience. For example, a chartered accountant might be expected to know if the company was trading while insolvent. You must also exercise a degree of care in your actions. The test of an acceptable level of care is what a reasonable person would do in looking after their own affairs.

Duties – other

There are many other areas of law that impose duties on directors and senior managers. Matters likely to be of particular relevance, depending upon the nature of the entity and its activities, are set out below:

  • You must comply with employment law in dealings with employees.
    • You (personally) can be sued for unfair dismissal, discrimination or unfair work practices, such as unequal pay.
    • Act quickly to ensure the company complies with any new employment laws.
  • You must comply with the Bribery Act 2010.
    • The Bribery Act sets out four criminal offences, including corporate liability for an organisation that fails to prevent an employee, agent, intermediary, subsidiary, joint venture partner or other third party committing bribery on its behalf.
    • The only defence to the Bribery Act’s ‘failure to prevent’ offence is where the company/ directors can show it/they had ‘adequate procedures’ in place to prevent bribery occurring. Therefore, you will need to be familiar and ensure compliance with your company’s anti-bribery compliance regime, including an effective means of providing and monitoring anti-bribery training.
  • You must ensure that the company complies with applicable competition law, such as not colluding with the company’s competitors to fix prices for the company’s products or services in the market.

Health and safety law

You must take reasonable care to ensure the health and safety of your employees.

  • A director is responsible for ensuring the health and safety of their employees and those that are affected by their activities so far as reasonably practicable.
  • A director is responsible for ensuring the company assesses and reviews the workrelated risks faced by its employees and by others affected by the company’s activities.
  • A director is responsible for ensuring there are appropriate arrangements for the effective planning, organisation, control, monitoring and review of the preventive and protective measures.

Note that companies with five or more employees must also have a written health and safety policy describing all health and safety arrangements which are put into practice.

A director can be held criminally responsible where the company is found guilty of a health and safety offence, and that offence was committed with the consent, or was attributable to any neglect on the part of the director.


Latest version updated 22nd March 2018

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