{"id":1027,"date":"2021-12-29T05:27:22","date_gmt":"2021-12-29T05:27:22","guid":{"rendered":"https:\/\/uk.legalvision.com.au\/?p=1027"},"modified":"2025-07-02T00:42:22","modified_gmt":"2025-07-01T23:42:22","slug":"directors-duty-of-care","status":"publish","type":"post","link":"https:\/\/legalvision.co.uk\/corporations\/directors-duty-of-care\/","title":{"rendered":"Do Directors Have a Duty of Care in the UK?"},"content":{"rendered":"

As a director or shareholder<\/a> of a company, you may have heard the phrase \u201cduty of care.\u201d While it is a common term concerning your duties as a director, it is not always clear what this duty entails. Even lawyers struggle to define the full extent of a company director\u2019s duties. However, the law places a great deal of responsibility on directors, including a duty of care towards their company. Failure to meet these responsibilities can result in criminal and civil liability in certain circumstances. Likewise, you risk disqualification from being a director in the future. <\/span><\/p>\n

To help you understand your obligations, this article explores what a director\u2019s duty of care means, to whom you owe this duty and an overview of other director duties.<\/span><\/p>\n

What is a Duty of Care?<\/span><\/h2>\n

A \u201cduty of care\u201d generally refers to an obligation to take \u201creasonable care\u201d to avoid causing someone else \u201cdamage\u201d. <\/span><\/p>\n

For directors, a duty of care means you must exercise reasonable care, skill and diligence when performing your role as director. In addition, the law imposes a general duty on all directors to carry out their responsibilities with sufficient carefulness and competence. <\/span><\/p>\n

Directors owe a duty of care to the company itself and not, typically, the shareholders, creditors, or other company directors. <\/span><\/p>\n

How is Duty of Care Measured?<\/span><\/h2>\n

 As a director, you will be measured against two different standards:<\/span><\/p>\n

First, there is an <\/span>objective standard<\/b>. Here, the law considers what any other reasonable director responsible for a company of a similar size and in similar circumstances of your company should do. <\/span><\/p>\n

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For example, suppose you run a recruiting company and employ five people. In this case, the objective standard would be to ask what any director of a recruiting company of your size might do. <\/span><\/p>\n<\/div>\n

Likewise, there is a <\/span>subjective standard<\/b>. This is a higher standard and means that if you possess some particular knowledge, skill, or expertise, your conduct will be considered in light of it. <\/span><\/p>\n

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For example, suppose that you also hold a qualification as a certified accountant in addition to being a director of a recruiting company. In that case, a court will consider this when assessing if your conduct is in breach of the duty of care. For instance, is the conduct in question related to your duty to maintain your company\u2019s accounts?<\/span><\/p>\n<\/div>\n

Ultimately, what constitutes a breach of a director\u2019s duty of care to the company depends on your individual circumstances.<\/span><\/p>\n

Also, it is not possible to delegate this duty. For instance, you may instruct an accountant to prepare your accounts, but you must exercise your power of supervision to ensure they are adequate. Likewise, suppose you are a director of a company but are not actively involved in managing the company (as some directors in family companies sometimes are). Here, you may be held liable for the actions of other directors. This is especially where there is fraud or other serious misconduct.<\/span><\/p>\n\n\n Continue reading this article below the form\n <\/i>\n<\/a>\n

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