Consequences of Breach of Duties of Directors under Companies Act 2006

As noted above, the codified duties are owed to the company and only the company will be able to enforce them but this will include an administrator or liquidator acting on behalf of the company.  In certain circumstances shareholders may be able to bring an action on the company's behalf (a derivative action).

 

The circumstances in which derivative actions may be brought have been extended by the 2006 Act and specifically include a breach of duty by directors (including any breach of the general duties in Chapter 2 of Part 10).  This applies even if you have not benefited personally from the breach.

 

Under section 178, the consequences of a breach or threatened breach of the duties are the same as for breach of the corresponding other principles in law, i.e. common law or equitable principles.

 

The remedy for a breach of section 174 (Duty to exercise reasonable care, skill and diligence) will usually be damages.  Remedies for breaches of other general duties may include:

 

If you have any question on any of those matters, or on any of the matters covered below, whether now or in the future, you should contact David Heys at Lawson West LLP on 0116 212 1027 or by email at dheys@lawson-west.co.uk.

 

Please see our other sections on

 

1. General Duties of Directors

2. Scope and Nature of the General Duties

4. Relief from Liability

5. Indemnity and Insurance

6. Practical Steps