Director’s duties and responsibilities
Before you become a director, you should be aware of their roles and responsibilities.
As a director, you have duties:
- to act within your powers and make sure the company follows its constitution as set out in the Memorandum and Articles of Association.
- to act in good faith to promote the success of the company for the benefit of its members using your skills, experience and judgment. You must also have taken into consideration employees, suppliers, customers, the environment and the community.
- to carry out your duties with reasonable care and skill. Higher standards may be expected from executive directors who are responsible for an area in which they have a specialist or professional qualification.
- to exercise independent judgement and make decisions for the benefit of the company, not yourself.
- to make sure that there is no conflict of interest and duty. You must not take bribes, and must disclose any personal interests to the company. You must not divert business opportunities to yourself that ought to be available to the whole company.
- to make a declaration of interest where appropriate. You may not be allowed to vote on matters if there is a conflict of interests.
- not to benefit from a third party by reason of your being a director, or by doing or not doing something.
- not to act with intent to defraud creditors or for any other fraudulent purpose.
- not to engage in wrongful trading, that is, allowing the company to carry on trading when you know (or ought to know) that it is insolvent. This can lead to personal liability.
- to carry out the statutory obligations imposed by the Companies Act 2006 and other legislation.
Directors are personally liable for certain actions taken while fulfilling their duties. Several laws give rights of action against directors in their personal capacity, including:
- The Insolvency Act 1986 which leads to personal liability where directors allow the company to trade wrongfully or fraudulently.
- The Health and Safety at Work Act 1974.
- Laws relating to the control and disposal of hazardous waste.
Directors are also responsible for keeping the Company’s records
You must keep:
- records about the company itself
- financial and accounting records
Records about the company
You must keep details of:
- directors, shareholders and company secretaries
- the results of any shareholder votes and resolutions
- promises for the company to repay loans at a specific date in the future (‘debentures’) and who they must be paid back to
- promises the company makes for payments if something goes wrong and it’s the company’s fault (‘indemnities’)
- transactions when someone buys shares in the company
- loans or mortgages secured against the company’s assets
You must tell Companies House if you keep the records somewhere other than the company’s registered office address.
Accounting records you must keep
You must keep accounting records that include:
- all money received and spent by the company
- details of assets owned by the company
- debts the company owes or is owed
- stock the company owns at the end of the financial year
- all goods and services bought and sold
- who you bought and sold them to and from
You must also keep any other financial records, information and calculations you need to complete your Company Tax Return.
If you don’t keep accounting records, you can be fined £3,000 by HM Revenue & Customs (HMRC) or disqualified as a company director.
How long to keep records
You must normally keep records for at least 6 years from the end of the last company financial year they relate to.
You may need to keep records longer if:
- they show a transaction that covers more than 1 of the company’s accounting period
- the company has bought something that it expects to last more than 6 years, like equipment or machinery
- you sent your Company Tax Return late
- HMRC have started a compliance check into your Company Tax Return
Company annual return
You must send Companies House a company annual return every year, within 28 days of the anniversary of the company’s incorporation.
You can send the company annual return online or on paper using form AR01.
If you miss the deadline, Companies House can close down your company or prosecute you. You could also be disqualified from being a company director.
What the company annual return includes
It must include details of:
- the company’s registered office address
- what type of business the company runs (e.g. accountancy, consultancy)
- the address where the company’s list of shareholders is kept
- the type of limited company (e.g. limited by shares, limited by guarantee)
- name and address of all company directors (and company secretary if you have one)
- the number and value of shares issued by the company and who owns them
- where details of ‘debentures’ (a type of loan the company has taken out with a promise to repay at a specific time in the future) are kept
Signs, stationery and promotional material
You must display a sign showing your company name at your registered company address and wherever your business operates. If you’re running your business from home, you don’t need to display a sign there.
You must include your company’s name on all company documents, publicity and letters.
On business letters, order forms, invoices and websites, you must show:
- the company’s registered number
- its registered office address
- where the company is registered (England and Wales, Scotland or Northern Ireland)
- the fact that it’s a limited company (usually by spelling out the company’s full name including ‘Limited’ or ‘Ltd’)
If you want to include directors’ names, you must list all of them.
If you want to show your company’s share capital (how much the shares were worth when you issued them), you must say how much is ‘paid up’ (owned by shareholders).
Company changes you must report
Changing your company’s registered office address
You must tell Companies House if you want to change your company’s registered office address. If the change is approved, they will tell HM Revenue & Customs (HMRC).
Other changes you must report
You must tell Companies House within 14 days if you make changes to:
- where company records are kept
- directors or their personal details, like their address
- company secretaries (appointing a new one or ending an existing one’s appointment)
You must tell Companies House within a month if you issue more shares in your company.
Changes that shareholders must approve
You may need to get shareholders to vote on the decision if you want to:
- change the company name
- remove a director
- change the company’s articles of association
Companies House has more details about the types of changes and resolutions you must report to them.
Reporting changes to HM Revenue & Customs
You must tell HMRC if your business’ contact details change.
If you want to get an accountant to manage your company’s Corporation Tax, you must tell HMRC. You do this on form 64-8, or using Corporation Tax Online.JOIN NOW