When Directors Get Burned: Liability For Corporate Misconduct Before And After Office

• Published date: 26 June 2025
• Subject Matter: Corporate/Commercial Law, Corporate and Company Law, Directors and Officers, Contracts and Commercial Law
• Law Firm: Devonshires
• Author: Michael Lewis and Prateek Sharma

Can a director be liable for misconduct that happened before they joined the board, or after they left it? The answer is yes, potentially. Both scenarios are increasingly being tested in litigation, insolvency proceedings, and regulatory actions.

This article explores the scope of a director's liability for continuing a problematic policy they did not create, the consequences for failing to act on known wrongdoing, and exploiting corporate opportunities post-resignation.

Liability for Pre-Existing Corporate Misconduct

The first place to start, as always, is with directors' core duties (ss.171-177, Companies Act 2006). To summarise briefly, once appointed, every director owes statutory duties to the company, regardless of when a questionable practice began. These include:

• duty to act within powers (s.171).
• duty to promote the success of the company (s.172).
• duty to exercise independent judgment (s.173).
• duty to exercise reasonable care, skill and diligence (s.174).

These duties are personal and non-delegable, even for non-executive directors or those joining a board. Each individual director owes personal responsibilities to inform himself of the company's affairs and join with his fellow directors in supervising them.

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