Director duties: what you can delegate and what you cannot

Key takeaways

Director duties delegation has a clear limit. Directors can delegate tasks to staff, accountants and outsourced providers, but they cannot delegate their duties under the Companies Act 2006, including reasonable care, skill and diligence and independent judgement. Delegating well means choosing capable people, giving clear instructions and supervising the results.

• Tasks can be delegated; statutory duties cannot.
• Directors must supervise what they delegate.
• Seven general duties sit in sections 171 to 177.
• Keep records of oversight and key decisions.

What are a director's general duties?

The Companies Act 2006 sets out seven: act within powers, promote the success of the company, exercise independent judgement, exercise reasonable care, skill and diligence, avoid conflicts of interest, not accept benefits from third parties, and declare interests in transactions. These stay with each director personally.

• Which business processes should you never outsource?
• You can outsource the work, never the accountability

What can directors delegate?

Almost all the work, provided they stay in control of it.

• Bookkeeping, payroll and filings preparation.
• Customer service and back-office admin.
• IT support and security monitoring.
• Research and analysis for decisions.

• Keep the decision, outsource the admin around it
• Companies House filings: your accountant files, you answer

What does good supervision look like?

Choosing a competent provider, setting clear instructions and limits, receiving regular reports, checking a sample of the work and acting when something looks wrong. Courts have found directors in breach for leaving everything to others without asking questions.

• Board packs: outsource the preparation, keep the story
• Financial controls that never leave the business

When do directors face personal risk?

When they fail to supervise and the company suffers loss, when they continue trading while insolvent without considering creditors, or for some offences, such as failing to file accounts. Delegation without oversight is not a defence.

• Irreversible decisions: why they stay with you

What does this look like in practice?

A pattern we see: a director hands finance entirely to an outside bookkeeper and stops reading the numbers. A monthly one-hour review of the accounts and payments keeps the director informed and the duty met.

• See client work
• BPO Solutions for UK businesses

Director delegation checklist

• Choose capable staff and providers.
• Give written instructions and limits.
• Receive regular reports.
• Sample the work and ask questions.
• Record key decisions and reasons.

• FCA firms: critical functions you can outsource, not offload
• Can you outsource your MLRO?

Next step

For each area you have delegated, write when you last checked it. Any area you have not looked at in three months needs a review.