Module 2 · Chapter 3

The Seven Duties

Every director owes the company seven duties under the Companies Act. This chapter explains each one in plain words, the board procedure that shows it was done, and what follows a breach.

≈ 11 min read 8-question test

In this chapter

  • The seven duties every director owes the Company
  • How the board's procedure shows that a duty was done
  • What follows when a director breaks a duty

3.1The seven duties in one paragraph

Each of the five directors owes the same seven general duties, set out in sections 171 to 177 of the Companies Act 2006. The duties are owed to the Company itself, not to any shareholder, even the one that put a director on the Board. The Charter lists the duties and then says what it does about them:

Charter §5.1The seven duties, and what the Charter does about them
Each director owes the Company the duties in sections 171 to 177: to act within her powers; to promote the success of the Company for the benefit of its members as a whole; to exercise independent judgement; to exercise reasonable care, skill and diligence; to avoid conflicts of interest; not to accept benefits from third parties; and to declare an interest in a proposed transaction. This Charter sets the procedure by which the Board and each director comply with those duties. It adds no duty, removes none and excuses no breach.
Read in the Board Charter →

Key point

The Act sets the duties, and the Charter sets the procedure. No board rule or minute can excuse a breach. What a minute can do is show that the duty was done.

Also in this chapter

  1. Why the procedure protects a director
  2. Acting within powers — section 171
  3. Promoting the Company's success — section 172
  4. Independent judgement — section 173
  5. Care, skill and diligence — section 174
  6. A deal or a situation — sections 177 and 175
  7. Benefits from third parties — section 176
  8. What follows a breach — section 178
  9. Your job

Preview

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