Breach of Directors’ Duties

Breach of Directors’ Duties: Expert Legal Advice for SMEs

At the Jonathan Lea Network, we advise company directors, shareholders, and SMEs on the complex and often sensitive issue of breaches of directors’ duties. Whether you are defending a claim, suspect misconduct by a co-director, or simply want to understand your obligations to avoid personal liability, our experienced solicitors are here to help.

Our team combines deep knowledge of the law, a practical and commercial mindset, and a clear, approachable style. We regularly help clients across the UK navigate these disputes, which can have serious financial, reputational, and even criminal consequences.

Why Directors’ Duties Matter

In the UK, directors are entrusted with the management of their company’s business. They are expected to act in the company’s best interests, uphold high standards of integrity, and exercise care and skill in their decisions. These duties are codified primarily in the Companies Act 2006, with additional obligations under common law and insolvency legislation.

If a director breaches these duties, they may be held personally liable to compensate the company for any losses, be forced to repay profits improperly gained, and even face disqualification or criminal charges.

For SMEs in particular, where personal relationships and overlapping roles are common, the risk of disputes over directors’ duties is high. Our role is to guide you through the legal and strategic options, protect your position, and help achieve the best outcome for you and your business.

What Are Directors’ Duties?

Directors owe a suite of fiduciary and statutory duties to the company. These include:

• Duty to act within powers: Directors must act in accordance with the company’s constitution and only exercise powers for their proper purpose. Acting beyond these powers can render transactions voidable and expose directors to claims.
• Duty to promote the success of the company: This core duty requires acting in a way most likely to benefit the company as a whole, taking into account employees, suppliers, customers, the environment, reputation, and fairness between shareholders.
• Duty to exercise independent judgment: Directors cannot simply follow instructions or abdicate their decision-making role. They must consider each decision on its merits.
• Duty to exercise reasonable care, skill, and diligence: Directors are held to both an objective and subjective standard, meaning that more is expected of directors who bring specialist expertise.
• Duty to avoid conflicts of interest: Directors must avoid situations where their personal interests conflict — or may conflict — with the company’s interests.
• Duty not to accept benefits from third parties: Gifts, hospitality, and inducements that could influence a director’s decision-making must be refused.
• Duty to declare interests in proposed transactions: Any direct or indirect interest in a transaction with the company must be fully disclosed.

These duties continue in certain respects even after a director resigns.

Common Breaches and How They Arise

From our experience, breaches typically arise in one of the following ways:

• Self-dealing: A director diverts business opportunities to themselves or a connected business without disclosure.
• Excessive remuneration or benefits: Taking unauthorised payments or accepting inappropriate benefits from third parties.
• Conflicted transactions: Participating in decisions where the director has a personal stake without proper approval.
• Failure to act in the company’s interests during insolvency: Continuing to trade when there is no reasonable prospect of avoiding insolvency can amount to wrongful trading.
• Negligence: Failing to exercise proper care in decision-making, resulting in losses to the company.

Breaches can be deliberate, careless, or even inadvertent — but the consequences are still potentially severe.

What Can Happen After a Breach?

If a breach occurs, the company (or in some cases its shareholders or liquidator) may bring claims against the director. Remedies can include:

• Repayment of profits made by the director (“account of profits”)
• Compensation for loss suffered by the company
• Injunctions to prevent further breaches
• Setting aside improper transactions
• Disqualification as a director for up to 15 years
• In serious cases, fines or criminal prosecution

These claims can be brought by the company, other directors on its behalf, shareholders through derivative claims, or liquidators in an insolvency scenario.

Your Biggest Concerns — And How We Can Help

We know how daunting these situations can feel. Common concerns our clients have include:

• “Will I be personally liable?”
  Yes, directors can be personally liable for losses arising from a breach of duty. We can help you assess the risk and negotiate settlements or defences.
• “What if another director has breached their duties?”
  We can advise shareholders and co-directors on how to bring claims, including derivative actions, and ensure the company’s interests are protected.
• “What about my reputation?”
  We understand the reputational damage these disputes can cause. We approach each case discreetly and strategically to protect your name.
• “Can I be disqualified?”
  Yes, the Insolvency Service can seek to disqualify directors found unfit. We can advise you on minimising this risk.

Protecting Yourself as a Director

As well as dealing with disputes, we advise directors on how to reduce the risk of future claims, including:

• Ensuring board decisions are properly minuted and documented
• Disclosing all potential conflicts of interest in advance
• Obtaining independent valuations for transactions
• Taking early advice if the company faces financial difficulties
• Considering Directors & Officers (D&O) insurance and indemnities where available

We can also assist with ratifying certain actions through shareholder resolutions or, where appropriate, applying to court for relief.

Why Choose the Jonathan Lea Network?

What sets us apart is our unique combination of:

✅ Specialist expertise: We regularly handle disputes and advisory work on directors’ duties, including high-value, complex claims.
✅ Tailored advice for SMEs: We understand the dynamics of owner-managed businesses and family-run companies where relationships matter.
✅ Pragmatic, commercial approach: We focus on solutions that protect your interests while minimising costs and disruption.
✅ Clear communication: We explain legal concepts in plain English so you can make informed decisions.
✅ Flexible fee options: We offer transparent fees and, in some cases, conditional fee arrangements.

Breach of Directors’ Duties FAQs

Take Action Today

Whether you are defending your position, bringing a claim against another director, or seeking to understand your obligations, it is vital to act promptly. Delay can limit your options, increase costs, and worsen the impact on your business.

📞 =44 (0)1444 708 640 to arrange a free initial consultation.

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Please do get in touch with us so that we can discuss your breach of director’s duties matter and utilise our expertise to steer you to the most suitable outcome.