Directors’ duties and corporate governance for in-house lawyers

Corporate governance often sits in the category of ‘important but not urgent’, until the moment it becomes critical. A control failure, ESG misstatement, cyber incident or regulatory intervention can instantly change the board’s situation, bringing decisions made months – or even years – earlier under intense scrutiny.

Boards must demonstrate how they monitor culture, diversity, ESG risks, cyber resilience and emerging technology governance. For in‑house lawyers, this shift translates into higher standards for documentation, process discipline and clarity of role.

This article offers practical guidance for in‑house lawyers who sit, or are considering sitting, as directors or company officers. Drawing on common failure points from recent investigations and litigation, we highlight gaps in process, unclear allocation of oversight, limited challenge in the boardroom and inadequate documentation of risk deliberations.

General counsel (GCs) and senior legal leaders must create governance structures that stand up to retrospective review. That includes:

• Designing decision‑making frameworks that clearly evidence informed oversight
• Strengthening board packs to show balanced risk analysis and alternatives considered
• Ensuring minutes demonstrate diligence
• Clarifying escalation routes for ESG, cyber, AI and other emerging risks
• Stress‑testing disclosure and reporting controls against evolving regulatory expectations.

Personal liability is mitigated by demonstrable processes as opposed perfect outcomes, and legal teams play a crucial role in ensuring directors not only act diligently but can prove it.

2026: a tighter governance landscape

As of January 2026, UK company directors must operate within an enhanced governance regime. The updated UK Corporate Governance Code introduces the following for premium-listed commercial companies and closed-ended investment funds:

• A formal declaration of effectiveness of internal controls
• Enhanced disclosure on how boards oversee and maintain risk management systems
• Clearer articulation of board oversight of culture, diversity and inclusion
• Explicit integration of ESG considerations into long‑term strategy, reinforcing section 172 duties.

Alongside this, and applicable to all companies, Companies House reforms bring mandatory identity verification for directors and strengthened transparency measures.

Core directors’ duties

Compliance with section 172 requires boards to evidence structured consideration of ESG risks, stakeholder impacts and long‑term sustainability. Failure to demonstrate this invites regulatory, investor and reputational challenge.

Under the Companies Act 2006, directors must:

• Act within their powers
• Promote the success of the company (section 172)
• Exercise independent judgement
• Exercise reasonable care, skill and diligence
• Avoid conflicts of interest
• Not accept benefits from third parties
• Declare interests in transactions.

Personal liability exposure

For in‑house lawyers stepping into director roles, reliance on D&O insurance or indemnities is not enough. A defensible process is now the most reliable protection. A directorship creates personal legal exposure distinct from the employment relationship, including:

• Disqualification proceedings
• Regulatory enforcement action
• Derivative shareholder claims
• Reputational harm.

Legal professional privilege

Dual roles create complexity and privilege can be compromised where the boundary between legal advice and board participation is not clearly maintained. Explicit role‑labelling in board papers and minutes is essential.

Where an in‑house lawyer participates in deliberations as a director:

• Legal professional privilege may be lost if communications are not clearly advisory
• Minutes may inadvertently blend legal analysis with commercial judgement
• Independence of advice may be challenged in subsequent disputes.

Conflicts of interest

The duty to avoid conflicts may require recusal or the appointment of independent external counsel. Dual roles heighten conflict exposure, particularly in:

• Internal investigations
• Regulatory inquiries
• Whistleblowing matters
• Transaction approvals.

The constitutional documents should be checked to confirm whether a conflicted director can form a quorum for participating and voting purposes.

Conclusion

This is a moment of increased influence for GCs and senior in-house lawyers, moving beyond their role as technical advisers to drive accountability. Given that decisions may be scrutinised long after the fact, directors need clear records that show they acted diligently.

Investing in clear roles, disciplined decision‑making and high‑quality records strengthens director protection and builds organisations able to withstand the most intense scrutiny.

Key takeaways for GCs and in‑house lawyers

1. Evidence is now the defining currency of governance

Boards will increasingly be judged on the strength of the records, not intention, so legal must lead the shift from good oversight to provable oversight.

2. ESG, culture and long‑term risk require explicit documentation, not assumptions

Section 172 is an evidential duty. Long‑term risks and stakeholder impacts must be clear in board papers and minutes.

3. Lawyer‑directors face heightened privilege and conflict exposure

Dual roles require clear boundaries. Privilege must be actively protected and conflict protocols defined early.

4. The strongest liability protection is a defensible process

Strong governance frameworks now define liability protection and insurance is not the shield it once was. The best protection is a structured, well‑recorded decision‑making framework capable of withstanding forensic scrutiny.