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Business & Corporate
A directorship is a legal office, not a title. CAMA 2020 attaches duties of good faith, care and skill to it, and those duties are owed to the company itself.
Companies and Allied Matters Act 2020
Our explanation, written for a general reader. It is not the text of the law.
Directors act for the company. The duties CAMA 2020 imposes — to act in good faith in what they believe to be the best interests of the company, to exercise reasonable care, skill and diligence, and to avoid improper personal benefit — are owed to the company as a legal person, not to any one shareholder.
Duties can attach by conduct. A person who is not formally appointed but who in substance directs the company may still be treated as a director, and someone on whose instructions the board acts may fall within the Act's definitions. Titles do not settle the question.
Conflicts are managed by disclosure, not silence. Where a director has an interest in a transaction the company is considering, the Act's machinery is declaration and proper authorisation — and companies that document this well are the ones that survive a fallout intact.
Where the official text lives, beside what it means in ordinary language.
Official text
Duties of directors
Companies and Allied Matters Act 2020 — general duties of directors
Plain language — our explanation
Directors must act in good faith in the company's best interests, and exercise the care, skill and diligence expected of a person in that position.
Official text
Conflicts of interest
Companies and Allied Matters Act 2020 — disclosure of interest in contracts
Plain language — our explanation
A director with an interest in a transaction involving the company is required to declare it, and the company deals with it through its proper processes.
Official text
Who is a director
Companies and Allied Matters Act 2020 — meaning of director
Plain language — our explanation
The Act looks at substance. People who act as directors, or on whose directions a board acts, can be treated as directors even without a formal appointment.
In real life
A director awards a supply contract to a company owned by a family member without telling the board.
The failure to disclose is the problem before the price is even examined; disclosure and authorisation exist precisely for this.
In real life
A founder resigns as director but continues to instruct the team and set strategy.
Duties can follow the conduct. Stepping back on paper is not the same as stepping back in fact.
What you should do
What you should not do
“Only the managing director carries duties.”
The duties attach to the office of director. Non-executive and part-time directors are within them.
“A company owning everything means directors face nothing personally.”
Limited liability protects shareholders' investment; it does not neutralise duties owed by directors to the company.
When to speak to a lawyer