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Whether its general duties detailed in the Companies Act 2006 or more specific duties included in your company’s articles of association, it’s vital that as company director you understand your responsibilities. If your company does become insolvent, there will be a shift in your duties.

In the seventh instalment of our companies in crisis Q&A series, we talk you through company director duties and how they change if the company becomes insolvent.

Key points

As a company director you owe general duties under the Companies Act 2006 to:

  • act within your powers in accordance with the company’s constitution, and only exercise these powers when they are granted
  • promote the success of the company
  • exercise independent judgment without subordinating your powers to others
  • exercise reasonable care, skill and diligence
  • avoid situations where you have or can have, a direct or indirect interest that conflicts with the interests of the company
  • not accept benefits from third parties
  • declare any direct or indirect interest in a proposed transaction or arrangement with the company to the other directors.

Your company’s articles of association can also include further duties that you need to adhere to as well as prohibit or limit powers.

The duties you owe are to the company, not shareholders or creditors. However, if the company becomes solvent the duty to the company is to act in the best interests of the shareholders so your duty shifts to acting in the best interests of the creditors.

If you think your company may become insolvent, you should always seek immediate professional advice. Our insolvency experts can talk you through your options.

The contents of this article are intended for general information purposes only and shall not be deemed to be, or constitute legal advice. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of this article.