A director who is directly or indirectly interested in a proposed transaction with their company must declare the nature and extent of that interest to the other directors before the company enters into it, under section 177 of the Companies Act 2006. If the interest is in a transaction the company has already entered into and was not declared under section 177, section 182 requires a declaration as soon as reasonably practicable, and failing to make it is a criminal offence.

When does section 177 require a declaration?

Section 177(1) applies if a director is in any way, directly or indirectly, interested in a proposed transaction or arrangement with the company. The director does not need to be a party. The explanatory notes (paragraph 347) say another person’s interest in a contract can require disclosure if it amounts to a direct or indirect interest of the director, and the notes to section 182 give the example of a director’s spouse contracting with the company.

What must be declared is the nature and extent of the interest. The explanatory notes (paragraph 350) are blunt: it is not enough merely to state that there is an interest, and disclosure to the members is not sufficient, because the declaration goes to the other directors. The declaration must be made before the company enters into the transaction (section 177(4)). If it proves to be, or becomes, inaccurate or incomplete, a further declaration is needed under section 177(3).

When is no declaration needed?

  • The director is not aware of the interest or the transaction, but they are treated as aware of anything they ought reasonably to be aware of (section 177(5)).
  • The interest cannot reasonably be regarded as likely to give rise to a conflict of interest (section 177(6)(a)).
  • The other directors already know, or ought reasonably to know, about it (section 177(6)(b)).
  • It concerns terms of the director’s own service contract considered by a board meeting or a committee appointed for the purpose under the constitution (section 177(6)(c)). Our guide to directors’ service contracts covers the separate rules for those.

The explanatory notes (paragraph 352) add that no section 177 declaration is required where the company has only one director, because there is nobody to declare to.

What does section 182 add for existing transactions?

Section 182 covers an interest in a transaction or arrangement that the company has already entered into, unless the interest was declared under section 177. Typical cases are a director appointed after a contract was signed in which they have an interest, or a director whose interest arises only after the company has contracted, for example because a relative later buys into the supplier.

The rules mirror section 177, with three differences:

  • the declaration must be made at a board meeting, by notice in writing under section 184, or by general notice under section 185 (section 182(2)); under section 177 those methods are optional;
  • it must be made as soon as is reasonably practicable, and a late declaration must still be made (section 182(4));
  • failure is an offence under section 183, punishable by a fine on indictment or a fine up to the statutory maximum on summary conviction. The explanatory notes (paragraph 370) confirm the offence does not affect the validity of the transaction.

The explanatory notes (paragraph 374) say a sole director does not need to comply with section 182. Section 186 makes an exception where the company is required to have more than one director, such as a public company: a sole director’s declaration must then be recorded in writing and is treated as part of the next directors’ meeting. Under section 187, a shadow director can declare only by written notice or by a general notice given in writing.

How is a declaration actually made?

Method How it works Record
At a directors’ meeting The director states the nature and extent of the interest to the board. Minuted under section 248 and kept for at least ten years.
Notice in writing (section 184) Sent to the other directors in hard copy, or electronically where they have agreed, by hand, post or agreed electronic means. Treated as part of the proceedings at the next directors’ meeting and minuted as if made there.
General notice (section 185) Notice that the director has an interest in a specified company or firm, or is connected with a specified person, and is to be regarded as interested in any later transaction with them. It must state the nature and extent of the interest or connection. Effective only if given at a directors’ meeting or the director takes reasonable steps to have it brought up and read at the next one.

A general notice is useful for a standing relationship, such as a director who owns a share of the company’s landlord, because it covers future dealings without a fresh declaration each time. It needs updating if the interest changes.

Can the interested director still vote?

The statute leaves this to the articles. The explanatory notes (paragraph 354) say conflicted directors may, subject to the articles, take part in decisions on such transactions. Under model article 14 for private companies, a director interested in an actual or proposed transaction with the company is not counted for quorum or voting purposes unless the members disapply that rule by ordinary resolution, the interest cannot reasonably be regarded as likely to give rise to a conflict, or a permitted cause applies. Disputes at a meeting about a director’s right to take part can be referred to the chair, whose ruling on other directors is final. If the interested director’s exclusion leaves the board without a quorum, the articles and the members will need to resolve it.

What about a company owned and run by one person?

Where a limited company with a single member contracts with that member, who is also a director, outside the ordinary course of business, section 231 requires the terms to be in writing, set out in a written memorandum or recorded in the minutes of the next directors’ meeting. Failure is an offence punishable by a fine up to level 5 on the standard scale, but does not affect the contract’s validity. This is the practical equivalent of a declaration for one person companies.

How does this work in practice?

Illustration only. Director D’s wife owns 60% of a cleaning firm, and D holds no shares in it. The company is about to sign a cleaning contract with the firm. Before signature D emails the other two directors, who have agreed to receive notices electronically, stating that his wife owns 60% of the firm and that the household benefits from its profits. The email is recorded in the minutes of the next board meeting. Under model article 14 D does not count in the quorum or vote. Because the arrangement is ongoing, D also gives general notice that he is to be regarded as interested in any future transaction with the firm, and has it read at the next meeting.

What mistakes do directors make?

  • Telling the shareholders rather than the other directors.
  • Saying “I have an interest” without its nature and extent.
  • Declaring after the contract is signed, which breaches section 177(4).
  • Assuming a declaration authorises a wider situational conflict. That is a separate duty, covered in our guide to directors’ conflicts of interest.
  • Forgetting that a declaration does not replace member approval where it is separately required. Section 180(3) keeps the approval rules for deals such as substantial property transactions, and loans to directors recorded through the director’s loan account have their own rules.

What happens if a director fails to declare?

Breach of section 177 has the civil consequences set by section 178, the same as for the equivalent equitable principle. Compliance has a real benefit: under section 180(1), where section 177 is complied with, the transaction is not liable to be set aside under any common law or equitable rule requiring member consent, although any statutory or constitutional approval requirement still applies. Failure to declare an existing interest under section 182 is a criminal offence. Our overview of directors’ duties sets out how these provisions fit together.

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Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 8 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.