Directors' Duties UK: Breach Claims & Defences (2026)

Overview

Directors' duties are the legal obligations every company director owes to their company. In England and Wales, these sit mainly in sections 171 to 177 of the Companies Act 2006, which codified what used to be scattered across case law and equitable principles.

The seven duties cover acting within your powers, promoting the success of the company, exercising independent judgement, applying reasonable care and skill, avoiding conflicts of interest, refusing improper third party benefits, and declaring any personal interest in a proposed transaction. The duties apply to every director regardless of job title, so de facto and shadow directors are caught too, not just those formally appointed at Companies House.

Breaches can be raised by the company itself, by shareholders through a derivative claim, by a liquidator if the company enters insolvency, or by the Insolvency Service through disqualification proceedings. The stakes range from an order to pay compensation, through to a ban from acting as a director for up to 15 years.

Key steps

1. Identify which duty is in play. Claims against directors usually focus on one or two specific duties rather than all seven. Work out whether the allegation relates to conflicts of interest, lack of care, acting beyond powers, or something else. The duty alleged changes what the claimant has to prove and the defences open to you. 2. Gather the board papers and contemporaneous records. Minutes, emails, financial information seen at the time, and any professional input the board relied on are central to both bringing and defending a claim. A director who can show they considered the relevant factors and took reasonable steps is in a much stronger position than one relying on memory alone. 3. Consider ratification and shareholder approval. Some breaches can be authorised or ratified by the members, which can bring a claim to an end. This is not available for every type of breach, and it is blocked where the company is insolvent or near insolvency, but it is worth exploring early before costs mount up. 4. Assess the remedies sought. A claim against a director might seek equitable compensation, an account of profits, rescission of a contract, or an injunction. The remedy shapes the strategy. Account of profits, for example, focuses on what the director gained rather than what the company lost, which produces very different numbers. 5. Take guidance before responding formally. Once a letter of claim or an application is served, deadlines start running. Talking through what you're facing with an experienced legal adviser, based on what you describe, helps you understand the shape of the dispute before you commit to a position in writing that may be hard to row back from.

Common questions