Have you recently set up a limited company? Are you thinking about setting up a limited company? Are you a director of a limited company and not sure of your responsibilities?
There are many company director responsibilities. In this blog we’ve highlight the most important responsibilities and provided some answers to FAQs.
Company Directors Responsibilities
As a director of a limited company, you are personally responsible for ensuring that the company complies with company law. All companies must file annual accounts with Companies House. The contents of filed accounts is reduced for small, medium and micro-entity companies based on turnover, balance sheets and the number of employees.
Directors are required to sign a declaration acknowledging their responsibilities with respect to accounting records
and the accounts. As a director, you must make sure that the statutory returns are filed on time with Companies House.
Your must ensure that the company’s business stationary, website, order forms, invoices and emails carry its name, registered number, country of registration and registered business address.
It’s a directors responsibility to know when the company needs to register for tax. This could be VAT, payroll, fuel duty and construction industry scheme (CIS) amongst others.
Statutory Records
Directors are legally required to keep specified registers, books and records that reflect the operation of the business. This is usually the company secretary’s primary responsibility. Also, it’s the responsibility of the director to ensure they’re maintained and kept up to date.
These records include registers of members/company secretaries/directors and their service addresses. The records will also include minutes of meetings, resolutions recording decisions and accounting records.
Failure to maintain the records or submit a return on time will result in the director(s) being liable to a fine.
Accounting records and annual accounts
As a director, you are responsible for the maintenance of the company’s accounting records. It’s a criminal offence if you fail to keep proper accounting records and can be punishable by a fine or even imprisonment. Late filing of account can also result in a charged penalty.
The accounting records must be sufficient to enable the directors to prepare accounts that provide a true and fair view of the company’s affairs for a particular timeframe.
Appointing Company Directors
Every limited company must have at least one company director. That director must be an actual person (as apposed to another company).
The first director(s) are appointed by the shareholders who form the company.
Directors are often also shareholders or employees of the company, but don’t have to be.
Exercise reasonable care, skill and diligence
The test of an acceptable level of care is what a reasonable person would do in looking after their own affairs, but taking into account the knowledge, skill and experience that you actually have.
You’re generally not liable for the actions of your fellow directors. However, you have a duty to make sure you’re informed about the company’s affairs. You may be liable if you turn a ‘blind eye’ to misconduct by your fellow directors.
FAQ’s
What is a confirmation statement?
A confirmation statement is a document that needs to be submitted to Companies House every year. This is to ensure that your business details are up to date.
You can do this by using the Companies House online service or contact us and we can file the confirmation statement on your behalf.
What is an ‘articles of association’?
Articles of association is a document containing written rules about running the company. This is agreed by the shareholders or guarantors, directors and the company secretary.
All limited companies must have articles of association. These set the rules company officers must follow when running their companies.
You can us standard articles known as ‘model’ articles or you can write your own and upload or send them when you register your company
“Model” articles of association are the standard default articles a company can use. They are prescribed by the Companies Act 2006.
What is the role of a company secretary in a limited company?
Like directors, a company secretary is considered an ‘officer’ of the company (as defined by the Companies Act 2006). They are an important member of the management team, often with far-reaching responsibilities.
One core duty of the company secretary is to ensure that the company operates within all financial, legal and statutory regulations. They are usually responsible for communication with shareholders and for administrative tasks related to shares and share transactions.
However, limited companies are no longer required to appoint a company secretary but you may still choose to.
What is a SIC Code (Standard Industrial Classification)?
The SIC code is a unique 5 digit code that has a trade description (or nature of business) associated with it. Companies House uses a condensed version of the full list of codes available from the Office of National Statistics (ONS).
The individual SIC codes are broken down into a number of trade groups. Once you have found the trade group that applies to your business activity, you can choose your nature of business from the individual SIC codes within that group.
How can I make changes to company details?
You can make changes to your company records by using Companies House online service (be aware of third party organisations offering this service at a higher charge). You can also contact us to make the changes on your behalf.
What are my responsibilities on insolvency as a director?
Where a company is in financial difficulties the directors should seek independent advice as soon as possible, if they are to avoid potential personal liability under insolvency legislation.
The potential risks for a director in this area are complex and include the risk of being disqualified from holding the position of director or being involved in the promotion or management of a company for a period of up to 15 years.
If you have questions about the company director responsibilities, or would like to find out the pros and cons of your business becoming a limited company, feel free to get in touch.