In the UK, company directors are bound by duties set out in the Companies Act 2006 and by fiduciary principles developed to protect companies and their shareholders.
These include duties for directors to act:
- Within their powers
- In good faith and in the company’s best interests
- With reasonable care, skill and diligence
- To avoid conflicts of interest
- Not to accept benefits from third parties
- To declare any interest in proposed transactions
When a company director’s conduct falls short of these duties, they may be held personally liable for the loss suffered by the company.
Examples of director negligence or misconduct can include:
- Professional negligence: if a director’s conduct falls below their required standard.
- Breach of fiduciary duty: where a director uses their position for personal gain, at the expense of the company, including making decisions or acting for their own benefit, rather than for the benefit of the company.
- Contractual: where directors’ actions breach their contracts.
- Employment Law related claims: for example, breaches of restrictive covenants, data privacy or intellectual property.
- Abuse of power: including taking more remuneration or benefits than their agreement allows.
- Director fraud: where directors engage in dishonest and even criminal conduct.
- Derivative claims: where shareholders bring a claim against directors for the benefit of the company.
If your company and/or its shareholders have suffered financial loss due to a director’s negligence or breach of duty, it’s important to seek expert legal advice as soon as possible.
TLW Solicitors’ specialist team deals with complex company litigation, including professional negligence and breach of fiduciary duty claims.
