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Breach of Directors’ Duties

Directors have a fiduciary duty to act in good faith in the best interests of the company and must put the interests of the company over their own personal interests. They also owe seven specific statutory duties under the Companies Act 2006.

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Breach of Directors’ Duties
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    Robin Henry

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What are my duties under the companies act 2006?

  1. To act within the powers given to them in the company’s constitution – usually, its articles of association.
  2. To promote the success of the company for the benefit of its shareholders as a whole – having regard to the long-term consequences of any decision, amongst other things.
  3. To exercise independent judgment.
  4. To exercise reasonable care, skill and diligence – this is judged against an objective standard reasonably expected of a company director and also takes into account the specific skill, knowledge and experience that the director actually has. More might be expected of an executive director with specific professional qualifications, such as the finance director, for example.
  5. To avoid conflicts of interest – for example, an interest in a competing business.
  6. Not to accept benefits from third parties – including, but not limited to, taking bribes.
  7. To declare interests in transactions or arrangements with the company – the company’s constitution typically will include further provision as to how conflicts of interest should be managed, for example, by restricting voting on affected transactions.

Failing to observe any of these obligations could give rise to a breach of directors’ duties claim.

Consequences of a breach of directors’ duties

Directors’ duties are owed to the company and, with limited exceptions, only a company can enforce them. The main exception is a derivative action by shareholders.

The usual remedy for breach of directors’ duties is compensation. Other remedies include an injunction against the director, setting aside the transaction, and having the director disqualified. Claims can be brought against the director personally and, crucially, their liability is not limited. This means that a director’s personal assets are potentially at risk if they are found to be in breach of directors’ duties.

If you are faced with a breach of directors’ duties at your organisation, speak to the commercial disputes team at Collyer Bristow. We take a commercial approach to cases, and are adept at the use of alternative dispute resolution methods, including direct face-to-face negotiations and mediation, to help clients find fast and cost-effective solutions to their disputes.

Breach of directors’ duties claims can have far-reaching consequences for the business. We act quickly to preserve your valued business relationships and prevent repetitions of the breach in the future.

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    Breach of Directors’ Duties key contacts

    Breach of Directors’ Duties

    Breach of Directors’ Duties

    Breach of Directors’ Duties

    Directors have a fiduciary duty to act in good faith in the best interests of the company and must put the interests of the company over their own personal interests. They also owe seven specific statutory duties under the Companies Act 2006.

    • Key contact

      Robin Henry

      Robin Henry

      Partner - Head of Dispute Resolution Services

      ArrowView profile

    • The Team

      Our lawyers have the expertise and experience to provide you with creative, personalised solutions in a clear and understandable way.

      ArrowMeet the team

    • Our Publications

      Discover a wealth of invaluable guidance in the form of guides and brochures written by our expert lawyers.

      ArrowSee our downloads

    • Our insights

      Discover the latest insights and thought leadership from our team of legal experts.

      ArrowFind out more

    What are my duties under the companies act 2006?

    1. To act within the powers given to them in the company’s constitution – usually, its articles of association.
    2. To promote the success of the company for the benefit of its shareholders as a whole – having regard to the long-term consequences of any decision, amongst other things.
    3. To exercise independent judgment.
    4. To exercise reasonable care, skill and diligence – this is judged against an objective standard reasonably expected of a company director and also takes into account the specific skill, knowledge and experience that the director actually has. More might be expected of an executive director with specific professional qualifications, such as the finance director, for example.
    5. To avoid conflicts of interest – for example, an interest in a competing business.
    6. Not to accept benefits from third parties – including, but not limited to, taking bribes.
    7. To declare interests in transactions or arrangements with the company – the company’s constitution typically will include further provision as to how conflicts of interest should be managed, for example, by restricting voting on affected transactions.

    Failing to observe any of these obligations could give rise to a breach of directors’ duties claim.

    Consequences of a breach of directors’ duties

    Directors’ duties are owed to the company and, with limited exceptions, only a company can enforce them. The main exception is a derivative action by shareholders.

    The usual remedy for breach of directors’ duties is compensation. Other remedies include an injunction against the director, setting aside the transaction, and having the director disqualified. Claims can be brought against the director personally and, crucially, their liability is not limited. This means that a director’s personal assets are potentially at risk if they are found to be in breach of directors’ duties.

    If you are faced with a breach of directors’ duties at your organisation, speak to the commercial disputes team at Collyer Bristow. We take a commercial approach to cases, and are adept at the use of alternative dispute resolution methods, including direct face-to-face negotiations and mediation, to help clients find fast and cost-effective solutions to their disputes.

    Breach of directors’ duties claims can have far-reaching consequences for the business. We act quickly to preserve your valued business relationships and prevent repetitions of the breach in the future.

    Breach of Directors’ Duties Publications

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