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Video: Directors' duties – Companies Act 2006

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The Companies Act 2006 included provisions relating to company directors, replacing and restating the previous law. It also introduced for the first time a statutory statement of directors' general duties.

The explanatory notes accompanying the Act explain that the purpose of the duties is to "form a code of conduct, which sets out how directors are expected to behave". It doesn't though tell them what to do.

This programme considers the impact of the duties on dealing with conflicts. The key change is to allow advance board authorization where a director has an actual or potential conflict of interest or duty. The Board must operate formal procedures for conflicts and must consider whether to authorize an actual or potential conflict.

The Act also introduced a new "derivative action". Shareholders now have a statutory right to sue directors, in the company's name, to recover loss the company has suffered as a result of the directors' negligence, default, breach of duty or breach of trust. They can also claim, again, in the company's name, against third parties implicated in any breach.