Company director duties in plain English

Last reviewed: 29 September 2026 · Reviewed by IFM's qualified accountant

The duties are owed to the company. They apply to formal directors and can also affect people acting as directors without a proper appointment or controlling the board from behind the scenes.

How do directors act within their powers?

Read the articles of association and any shareholder resolutions or agreements that affect authority. Use a director's powers only for the purpose for which they were given.

A director cannot treat ownership as unlimited authority. Shareholder approval may be needed for certain decisions, and a board decision should follow the process in the articles.

Keep a clear minute or written resolution for material decisions. The record should show what was decided, who participated and any declared interest.

How do directors promote the success of the company?

Act in good faith in the way most likely to promote the company's success for its members as a whole. GOV.UK summarises factors including long-term consequences, employees, business relationships, community and environmental impact, reputation and fair treatment of members.

This is a decision-making duty, not a promise that every decision will succeed. Record the information considered and the reason for the choice, particularly where the effect is material or members disagree.

When the company is insolvent or insolvency is probable, responsibilities shift towards creditors. Stop taking unusual payments or moving assets and obtain insolvency advice promptly.

What does independent judgement require?

Listen to shareholders, fellow directors and advisers, but make the decision yourself. A person who appointed a director is not entitled to dictate every vote.

Independent judgement does not mean ignoring good advice. It means understanding the issue, asking questions and reaching a view rather than approving a decision because someone else requested it.

What standard of care, skill and diligence applies?

The standard considers what a reasonably diligent person would do in the role and the director's own knowledge, skill and experience. A director with specialist expertise can be held to a higher standard in that area.

Read board information, challenge unexplained figures and follow up warning signs. A director who does not understand finance still needs enough information to oversee solvency, tax, payroll and filings.

How should directors avoid conflicts of interest?

Identify situations where personal, family or other business interests could conflict with the company's interests. Follow the articles and legal process for authorisation, and keep the decision properly recorded.

The duty can continue after a person stops being a director in relation to property, information or opportunities learned about in the role.

Examples can include competing businesses, personal use of company opportunities, connected suppliers and ownership in a party contracting with the company. The facts and authorisation rules matter.

When is a benefit improper?

Do not accept a benefit offered because of the directorship where it could create a conflict. Reasonable hospitality is not automatically prohibited, but context, value and intention matter.

Use a gifts and hospitality policy suitable for the business. Record offers around procurement, finance or contract decisions and seek advice when the position is unclear.

When must directors declare an interest?

Tell the other directors if you may benefit directly or indirectly from a proposed transaction or arrangement. Make the declaration before the company enters it and follow the constitutional and legal rules on participation.

A connected person's interest can be relevant. Do not assume a family relationship or another company is too indirect to mention.

Which Companies House information must directors maintain?

Directors are responsible for timely and accurate information, including:

annual accounts, even when dormant;
the confirmation statement;
changes to directors or their details;
a registered-office change;
share allotments;
charges; and
changes to PSC information.

The confirmation statement does not replace event-driven filings. Check what must be reported when the change happens.

How do directors oversee records and tax compliance?

The company must keep records showing money received and spent, assets and liabilities, and other information needed to explain its transactions and financial position. HMRC tax records generally need to be kept for six years from the end of the relevant financial year, or longer in specified cases.

Directors approve the annual accounts and ensure accounts and Company Tax Returns are filed. The company must pay Corporation Tax and other taxes that apply. Payroll, VAT and benefits create additional duties.

An accountant can prepare returns and keep records under an engagement, but the directors remain responsible for completeness, approval, payment and legal compliance.

How should company and personal money be separated?

Company assets belong to the company. A director should not take money without identifying and recording the legal basis, such as salary, expense repayment, dividend, loan or repayment of money previously introduced.

Dividends need distributable profits and proper approval. A directors' loan can create company and personal tax effects. Do not re-label withdrawals at the year end without examining what happened when the money was taken.

How do directors handle identity verification and codes?

Directors must complete Companies House identity verification and connect the verified identity to each role. New directors provide a personal code on appointment or incorporation; existing directors use the confirmation-statement process according to the current timetable.

The personal code belongs to the individual. Keep it secure and share it only with a trusted filer.

How do duties work when there are several directors?

Each director has duties. Dividing operational roles does not remove collective responsibility for oversight. Circulate reliable information, hold decisions properly and make sure one director's specialist role does not leave the others unaware of material problems.

If information is withheld or another director refuses to address a serious issue, take advice and record the steps taken. Resigning does not necessarily resolve responsibility for earlier conduct, and some duties continue after departure.

What can happen when a director fails in their duties?

Depending on the failure, consequences can include compensation to the company, reversal of a transaction, fines, prosecution, disqualification, tax penalties and personal liability. The position becomes more serious where records are false, assets are misused or the company trades while insolvent.

Treat filing reminders, cash-flow warnings, unpaid taxes and unexplained related-party transactions as governance issues, not merely administration.

What routine helps directors maintain oversight?

Review cash, tax and filing dates monthly. Read management information and reconcile it with the bank and liabilities. Keep minutes for material decisions and conflicts. Confirm that submissions have been accepted rather than merely sent.

At least quarterly, compare actual performance with the plan and review amounts owed to HMRC, suppliers, lenders and staff. Challenge unexplained balances and ask whether the company can meet obligations as they fall due. If solvency is uncertain, obtain professional advice early; the priorities and risks can change when insolvency becomes likely.

At least annually, check the statutory registers, Companies House record, registered office, service addresses, people with significant control and insurance. Review delegated access to banking, accounting and filing systems when staff or advisers change. Delegating the work does not delegate the director's responsibility to maintain oversight.

Minutes need not be elaborate, but they should identify the information considered, material alternatives, declared interests and the reason for a significant decision. Contemporaneous records are more reliable than an explanation reconstructed after a dispute.

Use the company formation and secretarial service for the agreed administrative support, while recognising that legal responsibility remains with the directors.

Use the Deadline Finder for standard first accounts, first confirmation statement and Corporation Tax dates. For VAT, payroll, personal tax and other obligations, check the tax deadlines calendar and your official records.

What should you read next?

What do people also ask about this topic?

What are the seven duties of a company director?

The duties are to act within powers, promote the company’s success, exercise independent judgement, use reasonable care, skill and diligence, avoid conflicts, refuse improper third-party benefits and declare interests in transactions. Other legal, tax, employment and insolvency responsibilities also apply.

Can a company director be personally liable for company debts?

Limited liability normally separates company debts from a director’s personal finances, but it is not absolute. Personal guarantees, wrongful or fraudulent conduct, misapplied assets, some tax failures and breaches of duty can create personal exposure. Obtain advice promptly if the company cannot meet debts.

Does using an accountant remove a director’s responsibility?

No. An accountant can prepare records, accounts and returns within an agreed scope, but directors remain legally responsible for the company’s records, accounts, performance and filings. Directors should provide complete information, review work, approve submissions and confirm that filings and payments were accepted.

Can the same person be a director and shareholder?

Yes. In many owner-managed companies one person is both director and shareholder, but the roles are legally distinct. A director owes duties to the company, while a shareholder exercises ownership rights. Decisions, payments and records should identify which capacity is involved.

Which official sources support this guide?

General guidance, not advice for your situation.