You don’t have to be a major organisation to form a limited company. Statistically, most companies have only a handful of employees, or are even solo enterprises. However, if you’re running a limited company, you’ll have the status of company director, and as such you’ll have various responsibilities.
Unfortunately, not all company directors are aware of what these are. How much do you know?
What Are a Company Director’s General Duties?
According to the Companies Act 2006 (sections 171-177) there are seven general duties a company director must undertake:
- To act within powers — acting within the decision-making powers that the company’s articles of association specify.
- To promote the success of the company — acting in a way most likely to benefit the company and all its stakeholders.
- To exercise independent judgement — acting on their own initiative, rather than just enacting the decisions of shareholders.
- To exercise reasonable care, skill and diligence — having and using an appropriate level of knowledge, skill and experience for the role.
- To avoid conflicts of interest — managing or avoiding situations where their loyalty and objectivity might reasonably be called into question.
- Not to accept benefits from third parties — not accepting any gift from outside the company that might be seen to influence their decisions.
- To declare interest in proposed transaction or arrangement — declaring any direct or indirect involvement outside the company in any business the company undertakes.
What Other Responsibilities Does a Company Director Have?
While the list above forms a company director’s principal duties, there are a wide range of other responsibilities, shared with other directors, starting with ensuring the company is registered for business tax and self-assessment. A limited company must be registered with HMRC within three months of starting trading.
There is also the responsibility to make various reports annually:
- Filing a Confirmation Statement with Companies House
- Filing accounts with Companies House
- Filing Tax Returns and accounts with HMRC
In addition, all directors have the responsibility of keeping company records, notifying Companies House of any changes in the company, and ensuring that all legally required information about the company appears on its stationery, online website(s) and emails.
What Personal Liability Does a Company Director Have?
In general, company directors aren’t personally responsible for the collective actions or debts of a company. However, a director who is shown to have individually contributed to a company’s wrongdoing, such as discrimination or failure to pay the minimum wage, could face a range of legal sanctions. These include fines, prosecution and being disqualified from acting as a director.
Similarly, a director who commits illegal acts with regard to the company’s finances could be liable to repay funds. However, a director who always acts in good faith and in accordance with their duties shouldn’t experience any consequences if, though no fault of their own, the company gets into trouble.
You’re very welcome to give me a call if you want to discuss your role as a company director further.