Company Directors (Duties) Bill

The Company Directors (Duties) Bill is due for its second reading in the House of Commons on 4 July 2025. If enacted, it will amend section 172 of the Companies Act 2006, placing greater legal emphasis on directors’ duties to consider the environment and employees when making decisions. This marks a significant shift in UK corporate governance and is of particular importance to company directors, boards, and stakeholders.

The current duty under section 172(1) requires directors to act in the way they consider, in good faith, would most likely promote the success of the company for the benefit of its shareholders. In doing so, directors must “have regard” to various factors such as the interests of employees, the impact of the company’s operations on the environment, and the desirability of maintaining a reputation for high standards of business conduct.

However, the proposed Bill introduces a new section 172(1A), which makes a key distinction: directors would now be explicitly required to act for the benefit of members, employees, and the environment—not just shareholders. This elevates environmental impact and employee welfare from secondary considerations to core statutory duties, thereby altering the weight directors must give to these factors in their decision-making.

Under the proposed Bill:

· Directors would be explicitly required to promote the success of the company for the benefit of members, employees, and the environment.

· Environmental impact and employee welfare would be statutory priorities, not merely considerations.

· Large companies would need to report on compliance within their annual Section 172 statements.

· Duties to “reduce environmental harm” would become a defined obligation (where reasonably practicable).

· These changes would apply from 6 April 2026, if the Bill becomes law.

What This Means for Your Business:

- Governance Reviews: Boards should review internal policies and ensure that decision-making frameworks explicitly account for environmental and employee impacts.

- Director Training: Consider tailored training for directors on their evolving duties and how to document compliance.

- Risk Management: Legal exposure could increase where directors disregard these new duties—especially in areas such as ESG performance and employee relations.

We are monitoring the Bill’s progress and will provide updates as it moves through Parliament. For tailored advice or a governance health check, please contact our Business Desk team.