Company Directors Responsibilities and Duties

Company-Director-ResponsibilitiesEvery limited company within the UK is required to have at least one director. If a company is set up using just one director, then it is a legal requirement that the director is a person (not another company) and that person must be of at least 16 years of age. Directors must also not be disqualified from being a director by a court of law. Directors may not be an un-discharged bankrupt. If a company is to have more than one director then any one of those directors may be another limited company. Appointment of directors is carried out by the shareholders (owners) of the company and must comply with the company’s articles of association. The director’s powers are generally laid out by the company’s articles of association.

General Responsibilities of a Company Director

A company director is in charge of running the company on a day-to-day basis and as such they have many responsibilities and duties. These are stated in detail by the Companies Act 2006 but generally include an overriding duty to act in a way that promotes the success of the company. Directors are also required to act with a certain degree of skill and in good faith. This includes obeying the law and not acting in a way which might conflict with the best interest of the company.

Specific Responsibilities

Company directors are also subject to a wide range of more specific responsibilities, covering the various aspects of running a business. These include:

  • Accounting Responsibilities – Company directors are responsible for ensuring that the company keeps correct accounts, including records of money both received and expended by the company. Failure to do so is a criminal offence, which can result in imprisonment.
  • Account and Report Submission – Company directors have a responsibility for ensuring that company accounts and company annual report is sent on time.
  • Director Service Contract – Directors are seen by the law as employees of the company. As such, they are required to have an employment contract in place. This is known as a director service contract. It covers things like the director’s responsibilities, terms of employment, terms of termination, pay and expense entitlement and much more.
  • Data Protection Compliance – Directors responsibilities also include carrying out a data protection notification and ensuring the company adheres to the data protection principles laid down by the Data Protection Act 1998.
  • Health and Safety – Company directors are responsible for ensuring that health and safety regulations are adhered to. This specifically includes carrying out a risk assessment and having a health and safety policy in place. This is especially relevant as the company grows and employs more people.
  • VAT Registration and Payment – Another company director responsibility involves ensuring that if and when the company annual turnover hits £85,000 the company carries out a online VAT Registration. It is also their duty to ensure that VAT payments are made on time to HMRC and the correct amounts are sent.
  • Employment Regulations – Directors have a responsibility to ensure that all employment law and regulations are adhered to. This means keeping up to date with changes in the law and having appropriate employment contracts in place among other things. Registering for PAYE with HMRC and deducting the correct amount of NI and income tax from employee wages is also another key duty of company directors.
  • Register of Directors – According to Section 162 of the Companies Act 2006, a company director must ensure that a proper register of directors is kept and held by the company. The register must contain the particulars of the directors and be held by the company in a place suitable for inspection. Failure to ensure this responsibility is complied with may result in an offence being committed and a fine of up to £5,000.

These are just a few of the responsibilities placed on company directors in their duty of running a limited company. They are put in place to ensure that the company is not abused and the directors act in the correct way. Despite these regulations, the limited company form is still the most tax efficient and secure business form and is used by over 2 million businesses within the UK today!

5 comments on “Company Directors Responsibilities and Duties

  • peter coates says:

    Who employs the 2 directors of a company (also shareholders) which has four shareholders each having 25% percent of the share capital. What rights do the non director shareholders have. No legal expert has managed to answer this question after I have paid out thousands of pounds.

  • I am an equal shareholder and director of a limited company. The other director and I are in commercial dispute and going for mediation. I have asked to see personnel records and pay roll information on current and past staff. This information is being held in the basement as we have to hold this information for six years. I am being denied access to this information by the other director and his daughter who is HR Manager and the Accounts Manager who is colluding with the other director. I am being denied access on grounds of data protection. I have been a shareholder director for 37 years in the company and have built it up to a multi-million pound company. Please advise.

  • Peter @ The Company Warehouse says:

    I would advise seeking some proper legal advice. Having said that, as a shareholder and director you have a right to see the management accounts which should be available to you at the registered office address of the company.

    The following is from the Companies House website:

    “A company must keep its accounting records at its registered office address or a place that the directors think suitable. The records must be open to inspection by the company’s officers at all times”. http://www.companieshouse.gov.uk/about/gbhtml/gp2.shtml#ch5

  • I am 1 of 2 directors who are equal shareholders but have not started trading. The other director did not disclose information to me about his past, however the community is well aware of his past and are making it public they will not be entering the restaurant if this person is part of the business. Everyone in the community is talking about it and the opening date has now had to be postponed until further notice. I asked him to resign as a director in the best interest of the company but he refuses. Today we held a meeting to discuss options but he is not worried about what the public think and still intends opening. I advised him that I would terminate him as a director if he does not resign, If I file with companies House the termination of a director can this backfire on me given I have the best interest of the business as well as the staff welfare as I could not guarantee a safe working environment with him there so therefore it is also not in the best interest of the company that he is a director. My intentions then are to strike the company off with CH as we have not commenced trading. Does this sound logical ?

  • Peter @ The Company Warehouse says:

    Whether you can do this is going to depend on your Articles and Memorandum of Association and other contracts. I would suggest that you need to seek some proper legal advice to find out the best way to proceed.

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