Becoming a company director comes with authority, but it also comes with legal responsibility. If things go wrong, directors can find themselves personally exposed — particularly where there are disputes, regulatory issues, or financial pressure.
At Johnson and Boon Solicitors, we advise directors and business owners on how to comply with their duties, reduce risk, and make defensible decisions.
A helpful way to understand directors’ responsibilities is to see them as three main types of duty:
1) Statutory duties
These are duties imposed by law, mainly under the Companies Act 2006. The key director duties are set out in sections 171 to 177, including:
- s171 — duty to act within powers
- s172 — duty to promote the success of the company
- s173 — duty to exercise independent judgement
- s174 — duty to exercise reasonable care, skill and diligence
- s175 — duty to avoid conflicts of interest
- s176 — duty not to accept benefits from third parties
- s177 — duty to declare interest in a proposed transaction or arrangement
2) Fiduciary duties
Directors are in a position of trust. Fiduciary duties require directors to act loyally and in good faith, including:
- putting the company’s interests first
- using powers properly (not for personal gain)
- avoiding conflicts or hidden benefits
- not misusing company information or opportunities
3) Operational duties
Directors must also ensure the company is run responsibly in practice, including:
- proper decision-making and record keeping
- appropriate governance and oversight
- managing risk, reporting and compliance
- responding early to signs of financial difficulty
You can still be treated as a director even if you’re not formally appointed
It is a common misunderstanding that director duties only apply if your name appears on Companies House.
In reality, someone can be treated as a director in law if they act like one — or if they have enough influence over the board’s decision-making.
For example, you may be considered a shadow director if you are not officially appointed as a director, but the appointed directors routinely follow your instructions or guidance. This can apply to individuals such as influential shareholders, investors, founders who have “stepped back”, or senior advisers.
This is an important risk point, particularly where there is financial pressure, dispute, or an investigation into how decisions were made.
If you are unsure whether your responsibilities extend beyond your job title or formal role, it is often best to take early advice.
Speak to a solicitor
If you are a director (or acting in a role of influence within a company) and you are concerned about your legal position, early advice can make a real difference. Johnson and Boon Solicitors can help you understand your duties, reduce personal exposure, and take the right steps before issues escalate. If you would like to discuss your situation confidentially, contact our team today.
FAQs: Director Duties
Can I be personally liable as a director?
Yes. While companies have separate legal personality, directors can still face personal consequences if duties are breached, particularly where misconduct, disputes, or insolvency issues arise.
Do director duties apply if I’m not paid?
Yes. Duties apply regardless of whether you are paid, unpaid, part-time, or a non-executive director.
Who do directors owe duties to?
Directors owe their duties to the company, not to individual shareholders, investors, or employees.
Can I have director responsibilities even if I’m not officially a director?
Yes. If you act like a director, or if you influence decision-making at board level, you may be treated as a de facto or shadow director, and legal risk can follow.
What if I’m a director “in name only”?
Even if you play a limited role, you may still carry full legal responsibility. If you are registered as a director, you should assume the duties apply and take advice.
What happens if there’s a conflict of interest?
Conflicts must be identified and dealt with properly. In many cases they must be disclosed, recorded, and managed through formal board process.
Do duties change when the company is struggling financially?
The legal risk increases significantly when a company is in financial distress. Directors should take advice early, particularly where cashflow issues or creditor pressure arise.
How can Johnson and Boon Solicitors help?
We advise directors on duties, governance, disputes, and risk management — including urgent support where the company is facing investor pressure or financial difficulty.