Could You Be Personally Liable? A Plain-English Guide to Directors' Duties

Nobody joins the board of a Resident Management Company expecting to think much about the Companies Act. Most people sign up because a flat needed a director and they happened to be in the room. The duties apply anyway, and understanding roughly what they mean is a lot less alarming than not knowing.

The seven duties, translated out of legal language

• Act within your powers. Stick to what the company's own rules actually allow, rather than what feels reasonable in the moment.
• Promote the success of the company. For a building's company, that usually just means its long-term interest, not any one flat's.
• Exercise independent judgment. Don't simply defer to whoever's loudest on the board, or to a managing agent, without forming your own view.
• Exercise reasonable care, skill and diligence. You're not expected to be a lawyer or an accountant, but you are expected to pay attention. Missing a filing deadline because nobody checked isn't a great look.
• Avoid conflicts of interest. Awarding a maintenance contract to your own business, or a friend's, without declaring it, is exactly the scenario this covers.
• Don't accept benefits from third parties. A "thank you" from a contractor the company just hired is worth declining, or at minimum declaring.
• Declare an interest in a proposed transaction. If a decision touches you personally, say so before the vote, not after someone else notices.

What limited liability actually protects you from

The whole point of a limited company is that its debts belong to the company, not to the directors personally. If the company can't pay a contractor's bill, that's not something that reaches into a director's own bank account, ordinarily.

What it doesn't cover: anything you've personally guaranteed, fraud, and continuing to run up debts once you knew, or should have known, the company couldn't pay them. A genuine breach of the duties above can also expose a director personally, though this is a genuinely rare outcome for someone acting in good faith, rather than the everyday risk it can feel like at two in the morning.

Where directors actually get exposed

The pattern in most real disputes isn't dramatic. It's informal decision-making with no minutes, one director effectively running everything while the others rubber-stamp it, missed statutory filings nobody was tracking, or service charge demands nobody checked were properly valid before they went out. None of these need bad intent to cause a real problem later.

Officers' liability insurance

Often called directors' and officers' insurance, this is worth asking your broker about specifically. Sometimes it's already bundled into the building's existing insurance, sometimes it isn't. It's not a substitute for doing things properly, but it exists precisely because good-faith directors can still get things wrong.

Reducing exposure without becoming a lawyer

Keep minutes of anything that matters, even briefly. Decide as a board rather than one person acting alone on anything significant. Keep the company's records and its annual filing genuinely current rather than assumed correct. Ask before guessing. A quick question to a solicitor or accountant is nearly always cheaper than the alternative.

Duties raise the fair question of whether the person carrying them should be compensated. The answer depends on your articles, your lease and HMRC, in that order: can an RMC director be paid.