When you become a company director it is essential you understand what your Director’s responsibilities are.
New statutory directors’ duties were introduced as part of the Companies Act 2006, and this means that among other things, as a director you have legal responsibilities towards your company – not just the shareholders.
The new statutory duties that were introduced in 2006 are very similar to the previous legal obligations for company directors, but if you’re not sure about what your obligations are, it’s worth familiarising yourself with them to avoid any breaches.
In general, as a director of a limited company, you must:
- Do your best to make the company a success, using your own skills, experience and judgement. For a trading company, this means that you’re expected to show an increase in the value of the company as one measure of its success.
The government also suggests that it’s up to the company directors to decide what success actually means for their own company, and The Companies Act specified a list of factors the directors must take into account in order to show that they are promoting the success of the company, including:
- the likely long term consequences of any decision they make
- the interests of the company’s employees
- the need to nurture the company’s business relationships with customers, suppliers and others
- the impact of the company’s operations on the community and the wider environment
- the appeal of the company upholding a reputation for high standards of business conduct.
- Make decisions about the company for the benefit of the company and not yourself.
- Act within the company’s constitution and powers
- Consider the interests of other stakeholders like company employees and creditors along with the interests of shareholders. So, if there was a cash flow problem, you would need to think about making sure that other people were paid what they were owed, and declaring a large dividend would be unwise.
- Make sure that the company complies with all the relevant legislation
- Be transparent and make sure that shareholders know if there’s any possibility that you’ll benefit personally from a company transaction.
- Keep accurate and up to date company records and report any changes to Companies House and HM Revenue and Customs (HMRC) You also have to make sure that the company’s accounts are a ‘true and fair view’ of the business’ finances
- File your accounts with Companies House and your Company Tax Return with HMRC on time.
- Pay the correct amount of Corporation Tax
- Register for self-assessment and send a personal self-assessment tax return, unless you’re director of a non-profit organisation or charity, and you weren’t paid or given any employee benefits as part of your directorship (gym membership, company car etc.).
There’s nothing to stop you outsourcing some of your responsibilities, but you are still responsible for making sure that they are carried out.
It’s essential that you know what the rules are if you become Director of a company, because you can be held personally liable for any breaches of legislation, leading to a fine, prosecution or disqualification from being a company director.
For more advice – contact Emma at Emma Stevens Accountancy Limited and I’ll be happy to help.
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