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Guidance for company directors on their legal obligations and how to avoid personal liability.
FAQs
What are my main responsibilities as a company director?
As a director, you are legally responsible for running the company properly and in its best interests. This includes:
Following the company’s rules (e.g. its articles of association)
Making decisions that benefit the company and its shareholders
Acting honestly and independently
Taking proper care when making decisions
Being transparent about any personal interests
In practice: If you approve a major contract, you must ensure it aligns with the company’s strategy and that you have properly reviewed the information before agreeing.
What does “acting in the best interests of the company” actually mean?
You must act in a way you genuinely believe will help the company succeed over the long term—not just deliver short-term gains.
You should also think about:
Employees and workplace wellbeing
Relationships with customers and suppliers
The company’s reputation
Environmental and social impact
In practice: Choosing a slightly more expensive supplier who is reliable and ethical may be justified if it supports long-term stability and reputation.
What should I do if I have a personal interest in a business decision?
If you could personally benefit from a deal or decision, you must:
Declare your interest clearly to the board
Step back from decision-making if required
Follow the company’s procedures for approval
In practice: If your spouse owns a business that wants to supply your company, you must disclose this before any contract is agreed.
How careful do I need to be when making decisions?
You are expected to:
Act with reasonable care and diligence
Stay informed about the company’s activities
Use your own skills and experience appropriately
You do not have to be perfect, but you must not act carelessly or ignore obvious risks.
In practice: You should read board papers, ask questions, and challenge decisions where necessary—simply “going along with others” is not enough.
What happens if I get it wrong?
If you breach your duties, the consequences can be serious. You may:
Have to compensate the company for losses
Be required to repay any personal gain
Be disqualified from acting as a director
In some cases, face fines or other legal action
In practice: Continuing to trade when a company is clearly insolvent can lead to personal liability for company debts.
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