Briefly....your Director responsibilities

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Your responsibilities as Director…

The Companies Act 2006 confirms existing case law and requires company directors to act in a way which is most likely to promote the success of the business and benefit its shareholders.

Company Directors are responsible for the management of their companies. Shareholders own limited companies but they don’t run them – that job is given to the directors. All limited companies must have at least one director and a company secretary is no longer required.

The company is a separate legal entity from its directors, shareholders and employees. The best interests of the company are not always the same as the best interests of the shareholders. You must consider the interests of other stakeholders such as creditors and employees and the long-term prospects of the company and its reputation.

As a director, you must exercise a degree of skill and care by showing the skill expected of a person with your knowledge and experience and act as a reasonable person would do looking after their own business.

You must act in good faith in the interests of the company as a whole. This includes:

  • treating all shareholders equally
  • avoiding conflicts of interest
  • declaring any conflicts of interest
  • not making personal profits at the company’s expense
  • not accepting benefits from third parties

You must obey the law:

  • company law requires you to produce proper accounts and send various documents to Companies House
  • other laws include areas such as health and safety, employment law and tax
  • you may be responsible for the actions of company employees

Directors’ powers and financial liabilities

The company’s Articles of Association limit what directors can do. Although they usually give you a great deal of freedom, you must check them. Some people are debarred from becoming directors which includes people who have been disqualified by a court from being a director and undischarged bankrupts.

You will be guilty of wrongful (or even fraudulent) trading if you allow the business to carry on, and incur debts, when you know there is no reasonable prospect of the company repaying them. If you do, you could be held personally liable for the company’s debts if it subsequently becomes insolvent. The fact that the company is making losses does not in itself mean that the company is trading wrongfully. However, if there is no reasonable prospect of moving into profit, and there are doubts about whether the company assets will cover its liabilities or whether it can repay its debts, the company is probably trading wrongfully.

Finally..

You must ensure that all the company’s business stationery carries its name, registered number, country of registration and registered address. These details must also appear on your company website, emails and order forms.

Exercise your directors’ responsibilities carefully and if in doubt, take professional advice. Acting improperly can lead to fines, disqualification from being a director and personal liability for the company’s debts or a criminal conviction.