Directors’ Duties in 2025: What Every Company Director Needs to Know
Being a company director offers a lot of benefits, but there are also many responsibilities that come with the role, as well as potential legal risks. It is essential for company directors to understand their legal duties and what they need to do to achieve compliance. This helps to support the smooth running of a business and protect directors against any personal liability should something go wrong.
In this article, we look at why company directors’ duties matter, what some of the key duties are, what happens if there is a suspicion that a company director has breached their duties, some changes to company directors’ duties in 2025, and how the team at Longmores can help with these issues.
Need advice on company directors’ duties? Please contact John Wiblin who will be happy to advise.
Key points to know about company directors’ duties in 2025
- A sound understanding of directors’ duties helps to facilitate good governance, reduce the risk of shareholder disputes and helps company directors to avoid personal liability for company debts in insolvency situations
- Company directors have various legal duties under the Companies Act 2006
- These duties include acting within their powers under the company constitution, promoting the success of the company, exercising independent judgement and acting with reasonable care, skill and diligence
- If a director is believed to have breached their duties, they could face action from the company, its shareholders and/or its creditors
- A director found to have breached their duties could be held personally liable for any losses suffered by the company, its shareholders and/or its creditors
- Where a director has breached their duties, they could also face criminal charges and/or disqualification from acting as a director in the future
- From autumn 2025, there will be new identity verification requirements for company directors under the Economic Crime and Corporate Transparency Act 2023 (ECCTA)
- Under ECCTA, any newly appointed director will be barred from continuing in their role if Companies House is not notified of the appointment within 14 days
- Companies House will also need to be notified of any changes to a director’s details within 14 days or the company could face a fine
- Directors could soon be required to balance their duty to promote the success of the company with considerations about the environment and the business’s employees, under the terms of the Company Directors (Duties) Bill currently before Parliament
- Longmores can advise company directors on their duties, assist with compliance and step in to help resolve any disputes that may arise in relation to these duties
Why do directors’ duties matter?
Directors’ duties matter both for companies and for directors’ personal interests.
Understanding and conforming to the requirements of directors’ duties is critical for good corporate governance, especially in the area of risk and compliance. Failure to comply with these duties could result in serious consequences for the company, including fines.
Directors’ duties are also designed to minimise the risk of shareholder disputes. Directors must act in their company’s interests, carry out their role to an appropriate standard and maintain transparency, which should help to avoid questions about their conduct.
On a personal level, compliance with directors’ duties is important as it helps to limit the risk of a director being held liable for company debts if the business becomes insolvent. It can also reduce the likelihood of any claims being made against a director or an application being made to disqualify them from acting as a director in future.
What are the key duties of a company director?
There are seven key duties of a company director:
- Acting within the company’s constitution
- Promoting the company’s success
- Exercising independent judgement
- Carrying out their role with reasonable care, skill and diligence
- Disclosing any potential conflicts of interest
- Refusing any gifts or benefits from third parties that could give rise to a conflict of interest
- Declaring any interests affecting any existing or proposed transactions or arrangements involving the company
Records must be kept of how these duties have been complied with, including through accurate minutes of any board meetings.
What happens if a company director is thought to have breached their duties?
Directors can face legal action from their company, its shareholders and/or its creditors if they do not fulfil the duties of their office. The director could be removed from their role and/or required to repay any losses experienced by the company, its shareholders and/or its creditors. They could also be fined and be disqualified from acting as a company director in future.
How are company directors’ duties changing in 2025?
New requirements will be placed on company directors from autumn 2025 when the Economic Crime and Corporate Transparency Act 2023 (ECCTA) comes into effect.
Under ECCTA, directors will need to verify their identities with Companies House, either through the government’s One Login Check app or the equivalent web service, or face-to-face at participating Post Offices.
Companies House will also need to be notified within 14 days whenever a new director is appointed. If this is not done, the director will be barred from continuing in their role.
If any of a director’s details change, such as their name or home address, this must be communicated to Companies House within 14 days or the company could be fined.
While it is unlikely to have any immediate effect in 2025, the Company Directors (Duties) Bill currently being considered before Parliament could make a significant change to directors’ duties. The Bill proposes that company directors should be required to balance their duty to promote the success of the company with environmental concerns and the good of the business’s employees.
As this is a Private Member’s Bill, there is no guarantee it will become law. Currently, the Bill is in its second reading before the House of Commons, so even if it does become law, this will likely not apply until 2026 at the earliest. However, this is an issue company directors should keep an eye on as the Bill could significantly impact how they make decisions if enacted.
How Longmores can help with company directors’ duties
At Longmores, we regularly advise companies and their directors on compliance with their legal duties. We can ensure you understand your obligations and liabilities, as well as supporting you to take the right actions at the right time. If a shareholder alleges that you have treated them in a way that is unfairly prejudicial to their interests, or a liquidator of your company claims money from you, or the Insolvency Service have indicated that they will seek to have you disqualified from being a director, or any other issue arises out of your conduct whilst holding the office as a director then our highly experienced Business Dispute Resolution team can help you to find a positive outcome that protects your personal interests and those of your business.
For advice on company directors’ duties, please contact John Wiblin who will be happy to advise.
Please note, the contents of this blog are given for information only and must not be relied upon. Legal advice should always be sought in relation to specific circumstances.
