Breach of Director Duties

Directors’ duties in the UK, codified in the Companies Act 2006, impose specific legal obligations on directors, ensuring they act in the best interests of the company and its shareholders.

Directors must act within their powers as defined by the company’s constitution, promote the success of the company, exercise independent judgment and reasonable care, skill, and diligence, avoid conflicts of interest, not accept benefits from third parties, and declare any interest in a proposed transaction or arrangement. These duties are fundamental for the trust and integrity that shareholders place in the directors to manage the company’s affairs effectively and lawfully.

If you are a director seeking to navigate your duties or a shareholder concerned about potential breaches of these obligations, our law firm can provide expert legal advice and assistance. We offer guidance on compliance, risk management, and the resolution of disputes.

To book a Free Consultation with our expert dispute resolution lawyers, you can call us on 0207 459 4037, or you can use our booking form below to ensure your or the company’s interests are protected and advanced.

Yes, directors can indeed be held personally liable for breaches of their duties. This liability may arise if their actions or omissions have caused the company to suffer loss, or if they have gained personal benefits improperly.

The liability may be financial, and in some cases, directors might be compelled to return profits made or compensate the company for losses incurred. The law also permits shareholders to take action against directors in certain circumstances, such as when a director acts in a way that unfairly prejudices shareholders.

Our law firm has significant expertise in advising on and defending claims of breaches of directorial duties, and pursuing claims against directors on behalf of shareholders (including minority shareholders). We work proactively to help directors understand their responsibilities and to devise strategies to ensure that your dispute can be resolved quickly and cost-effectively.

For comprehensive legal support, book a Free Consultation with us on 0207 459 4037 or via our online booking form.

Under UK law, directors are expected to adhere to various duties as outlined in the Companies Act 2006. Breaches of director duties can include:

• failing to act within their powers
• not promoting the success of the company
• neglecting to exercise independent judgment, or
• not exercising reasonable care, skill, and diligence.

Other breaches can involve conflicts of interest, accepting benefits from third parties, or not declaring an interest in a proposed transaction or arrangement.

If you have a dispute within your company, please do not hesitate to contact our expert lawyers for a Free Consultation on 0207 459 4037.

Shareholders can bring a claim against a director for breach of duties through a derivative action, which allows a shareholder to initiate proceedings on behalf of the company. This requires the permission of the court, which considers if the claim is beneficial for the company and not just the individual shareholder.

Remedies available include compensation for losses incurred by the company and restitution for profits made by the director from the breach. In certain situations, directors may be disqualified from holding company office in future.

The standard of care expected from directors under UK law is twofold; they must exhibit the care, skill, and diligence that would be exercised by a reasonably diligent person with both the general knowledge, skill, and experience that may reasonably be expected of a person carrying out the same functions as the director in relation to the company (objective test), and the general knowledge, skill, and experience that the director has (subjective test).

A breach is determined by assessing the director’s conduct against these standards. Our legal team can help clarify these expectations and determine if a breach has occurred.

If you are not sure whether a director has breached their duties, it is important to act quickly and obtain legal advice on the next steps to protect your business. Please not hesitate to arrange a Free Consultation with our expert lawyers on 0207 459 4037 today.

Directors can be held liable for their decisions if a company becomes insolvent under certain circumstances. UK law imposes duties on directors to minimise potential losses to creditors as a company approaches insolvency.

If directors fail to act in the creditors’ best interests during this time, they may be liable for wrongful trading. Additionally, if they continue to trade while knowing there is no reasonable prospect of avoiding insolvent liquidation, or if they engage in transactions defrauding creditors, they could be personally liable for company debts and potentially disqualified from serving as a director in the future.

Yes, directors can be disqualified from acting as company directors for a range of offences, including breaching their duties. This can occur under the Directors Disqualification Act 1986, which sets out the circumstances in which a court may order a disqualification. Such circumstances include gross negligence, fraudulent trading, or unfit conduct in the management of a company. The period of disqualification can range from two to 15 years, depending on the severity of the breach.

Our legal team has extensive experience in dealing with director’s disqualification and can provide expert advice on these issues, helping to protect your rights and interests. To book a Free Consultation with our expert dispute resolution lawyers, you can call us on 0207 459 4037 or use our booking form below.

Fiduciary duties and statutory duties of directors in the UK serve to ensure directors act in the best interests of the company.

Fiduciary duties arise from common law and are based on trust and loyalty, requiring directors to act in good faith towards the company, avoid conflicts of interest, and not profit from their position without consent.

Statutory duties, on the other hand, are codified in the Companies Act 2006 and outline specific responsibilities such as the duty to promote the success of the company and exercise reasonable care, skill, and diligence.

Violations of both can lead to legal action against directors, and our lawyers well-equipped to advise on the implications of these duties.

Shareholders’ agreements and articles of association are vital documents in any UK company, establishing a framework for company operations and governance. The articles of association are a public document that sets out the responsibilities and powers of directors, including their duties and the procedure for decision-making. Shareholders’ agreements, while private contracts, complement the articles by detailing additional agreements between shareholders, such as director appointment, voting rights, and management policies, which may influence director duties and liabilities.

Both documents can also stipulate specific circumstances under which directors might be liable for company actions. Our lawyers can assist in interpreting these documents to ensure clarity in director responsibilities and protections.

Directors may be held liable for decisions made collectively by the board as well as for their individual actions. Liability for collective decisions arises when directors breach their duties by not acting in the company’s best interests, even if following a board decision. This is underpinned by the principle that each director has a duty to exercise independent judgment and must not blindly follow the decisions of others.

However, directors who can demonstrate that they acted reasonably, took proper steps to minimise potential harm, or dissented from the majority decision may have a defence to such liability.

Our expert legal team can provide expert advice on director liabilities, individual or collective, and ensure you are informed about your legal position. Please do not hesitate to contact us today for a Free Consultation on 0207 459 4037.

Conflicts of interest in director and shareholder disputes are taken seriously. Directors have a duty to avoid situations in which they have, or can have, a direct or indirect interest that conflicts, or possibly may conflict, with the interests of the company. This is outlined in the Companies Act 2006. Any potential conflict must be disclosed to the board and may require approval by the board or shareholders, depending on the articles of association.

It should be noted that any failure to manage conflicts of interest appropriately can lead to director disqualification, shareholder actions, or voidable transactions.

Our firm can provide comprehensive advice and representation to ensure conflicts of interest are properly addressed and resolved. To book a Free Consultation with our expert dispute resolution lawyers, please call us on 0207 459 4037 or complete our online booking form.

When determining whether a director’s actions were in the best interests of the company, several factors are considered. These include the director has complied with the company’s articles of association, the long-term consequences of decisions, the interests of the company’s employees, the impact on customers and suppliers, the community and environment, the company’s reputation, and the need to act fairly between members of the company.

A director’s actions are judged against what a reasonably diligent person with the same knowledge and experience as the director would believe to be in the best interest of the company.

Understanding these factors can be complex, but our expert lawyers are equipped to navigate through such assessments and provide clarity and guidance.

In the UK, the limitation period for bringing a claim against a director for breach of duties is generally 6 years from the date on which the breach occurred. However, there are exceptions, such as if the breach involved fraud or the director concealed information, where the limitation period may start from the date the breach was discovered or could have been discovered with reasonable diligence. It is imperative to seek legal advice as soon as possible if you suspect a breach has occurred.

Yes, there are several defences available to directors accused of breaching their duties. A common defence is that the director acted in accordance with the ‘business judgment rule’, meaning they made a business decision in good faith, on an informed basis, and with the honest belief that the action taken was in the best interests of the company.

Directors may also argue that they acted on professional advice, which demonstrates the exercise of due diligence. Moreover, ratification by the company’s shareholders may absolve a director if the shareholders approve the action after full disclosure, provided the act is not illegal.

In situations involving accusations of breach of duty, our legal team can provide robust legal representation and advice to explore all potential defences. To discuss the specific details of your case and how we can assist you, book a Free Consultation with our expert dispute resolution lawyers by calling 0207 459 4037 or using our booking form.