Directors and Officers under Companies Act 2006 — UK 2026
The Companies Act 2006 sets out six statutory duties directors owe to the company. Breach exposes directors personally — damages come from personal assets unless D&O insurance responds. This page unpacks the six duties and the practical liability framework.
The six statutory duties (sections 171-177)
Section 171 — Act within powers
Director must act in accordance with the company's constitution and exercise powers only for their proper purpose.
Section 172 — Promote success of the company
Director must act in the way considered, in good faith, most likely to promote the success of the company for the benefit of members as a whole. Six factors to consider (s.172(1)(a)-(f)): long-term consequences; employees' interests; supplier/customer relationships; community and environment; company reputation; fair treatment between members.
Section 173 — Exercise independent judgement
Director must exercise independent judgement in decision-making.
Section 174 — Exercise reasonable care, skill and diligence
Objective + subjective standard. General knowledge, skill and experience reasonably expected of a person in that position (objective) AND the actual knowledge, skill and experience the director has (subjective).
Section 175 — Avoid conflicts of interest
Director must avoid situations where personal interests conflict, or may conflict, with those of the company.
Sections 176-177 — Third-party benefits and interests
Section 176: not to accept benefits from third parties. Section 177: declare interest in proposed transaction or arrangement.
Consequences of breach
- Personal liability to compensate the company for loss.
- Restoration of company property.
- Account of profits where director benefited personally.
- Set-aside of transactions.
- Derivative claims under Part 11 Companies Act 2006 where shareholders bring claims against directors on behalf of the company.
D&O insurance framework
What D&O covers. Defence costs, damages, settlements arising from claims of breach of director duties. Regulator investigations. Some wordings extend to extradition costs.
What D&O excludes. Fraud, dishonesty, deliberate breach. Personal profit / third-party benefit under s.176. Fines and penalties (uninsurable in UK).
Standard cover levels. £1m sole director / small firm. £2m standard SME. £5m mid-size. £10m+ PLC-adjacent.