What are the duties and obligations of a director?
That’s a question we’re frequently asked at Steven Glicher accountants. Clients understandably want to know what is expected of them and what legal responsibilities they would have to fulfil as well as wanting to know if they would be better off being a director. So Steven Glicher accountants have drawn up a brief overview of what is expected if you’ve just formed your new company and have appointed yourself as a director.
We’ll outline what it really means to be a director, and explain what is expected from you and what your legal responsibilities are.
We think this information is vitally important, because being a director is not a role any person should accept lightly.
What is the director’s role?
Directors are generally responsible not just for determining the company’s strategy, but also for monitoring a company’s progress and reporting on the company’s activities to the relevant parties, like shareholders where applicable. In larger organisation, directors will also be responsible for appointing senior members of staff.
What powers does a director have?
Directors are generally responsible for the management of the company and they can exercise all the powers of the company. However, the extent of their authority may be restricted by the Companies Act 2006 and the Articles of Association, which define the rules governing how the company is to be run, including what the directors’ powers and responsibilities are.
What are a director’s duties?
As soon as you are appointed a director of a company you become an officer with extensive legal responsibilities. For a director of an incorporated body, the Companies Act 2006 sets out the following statement of your general duties:
- to act within their powers.
- to promote the success of the company for the benefit of its members.
- to exercise independent judgement.
- to exercise reasonable care, skill and diligence.
- to avoid conflicts of interest.
- not to accept benefits from third parties.
- to declare an interest in a proposed transaction or arrangement.
In essence what the legislation requires is that directors act in the interests of their company and not in the interests of any other parties (including shareholders). So even if you’re in the enviable position of being the only director and owning all of the shares, you would still have to ensure that you do not put your own interests above those of the company.
Reporting to Companies House.
Every company director has a personal responsibility to deliver statutory documents to Companies House as and when required. These statutory documents include:
- annual returns; and
- notice of change of directors or secretaries or notice of any changes in their personal details
It is also the responsibility of the directors to ensure that the company maintains full and accurate accounting records. The caveat to that is that although they are technically personally responsible for delivering this information to Companies House, there is no reason why directors cannot delegate these tasks to others, like their accountant.
In addition to the statutory duties, directors are also subject to numerous other pieces of legislation like the Insolvency Act 1986, the Company Directors’ Disqualification Act 1986, the Health and Safety at Work etc Act 1974 and the Corporate Manslaughter and Corporate Homicide Act 2007.
What happens if directors do not comply with these legal obligations?
There is a misguided belief that directors cannot be held personally liable for the failure to discharge their duties and responsibilities. However, it should be noted that directors can be held personally liable both civilly and criminally for certain offences. Even failure to file the accounts or annual return to Companies House is a criminal offence and can lead to prosecution and a fine of up to £5,000 – in addition to any late filing penalties
How can Steven Glicher accountants help?
If you would like to concentrate on running the business, rather than focusing on time-consuming paperwork, Steven Glicher accountants can assist you with complying with your full duties and responsibilities as a director. We can also help you with the following services:
- Reporting to Companies House on your behalf, including the preparation of the company accounts and tax return, and advising you of any corporation tax liability due.
- Company secretarial services, such as maintaining the statutory registers, filing statutory information with Companies House and providing members and directors with notice of meetings.
- Bookkeeping services including sourcing a product to suit your needs.
- Tax planning advice; for the company and you personally- including the preparation of your personal tax return.
Contact Steven Glicher accountants today to find out more about our services for limited companies and how they can benefit your business on 0161 485 8007.