Introduction -UK director duties and responsibilities
What are the director duties (UK) for an individual who runs their own UK limited company? Furthermore, what are your UK company director responsibilities when you have your own limited company? When you are a director and have set up your own company, you should be aware of several duties and Companies House director responsibilities. Please note that you will also need to keep up with these UK director responsibilities on an ongoing basis.
The reason you will need to keep up with your responsibilities is that when you are a director, there are certain standards that you must maintain. The duties of directors of a company include both duties and tasks and the authorities expect you to adhere to these for the good of your company’s business. They are also there to make sure that things run smoothly each day. In summary, following these as part of your company management will keep you in good stead going forward.
As a director, your company appoints you to manage the day-to-day running of your business and its affairs. In addition, you are in charge of the business and its finances. What’s more, you will need to ensure that all of your legal filing responsibilities are met and are on time.
In the future, if you ever find yourself in a position where your company cannot pay its taxes, there are certain things which you need to consider.
Initial considerations –director duties (UK)
Please read our article covering contractors’ tax tips for the valuable information you should know when you have your own business. This includes our latest advice for the best tax planning ideas.
As a director, you must act lawfully and be honest at all times. You will need to make decisions that are for the good of the business and its shareholders.
What’s more, you must try and promote the success of the company. This will require general knowledge, skill and experience, and you will use your judgement in the best interests of the company to help it achieve its business goals and objectives.
A UK company director’s duties (UK) and formal responsibilities are set out in the Companies Act 2006. The Companies House director’s responsibilities are also set out in the Memorandum of Association. Indeed, so should any service contract that is in place between a director and their company. The Companies Act 2006 directors’ duties lay out a formal regime for directors, containing seven key requirements. You should follow these when you have your own UK company.
The seven key requirements
The key requirements, which are part of your company’s constitution, are set out in the Act as follows:
- You must always act within your powers as the director.
- As a director, you must act in a way you consider, in good faith, to be the most likely way to promote the company’s success. Generally, success will mean a long-term increase in the value of the business; however, it is up to each director to decide in good faith whether taking a particular course of action will be appropriate for the company. As part of the promotion of your company, you could consider some marketing and advertising.
- You must exercise your judgement.
- As a director, you must exercise reasonable care, skill, and diligence.
- You must try to avoid any conflicts of interest.
- As a director, you must not accept any benefits from third parties.
- You must declare interests in any proposed transactions and arrangements with your company.
The Memorandum of Association provides certain data. This document contains the details of a director’s rights, duties, and power, as authorised by the shareholders under the provisions of the Companies Act.
The Companies Act 2006 directors’ duties -the general duties
Some general duties also apply, and they are part of the responsibilities and duties of a director (UK). These cover a wide area, and these are:
- Make decisions for the good of the company and its owners. A director’s decision-making will also need to bear in mind the interests of any creditors.
- Maintain the business’s records. What’s more, a director needs to have these ready for an HM Revenue & Customs (HMRC) review if and when this is required; therefore, they also need to know how long to retain business records. The business records will also include the PSC (Person with Significant Control) register. When running your own company, you must always keep business records up to date. A review of your business records could come up at any time, and if your documents are up to date, you will be ready for this.
- Keep correct accounting records for the business. In turn, this means that you need to update your files regularly. Furthermore, it also means that you must ensure that you include everything and enter it correctly.
- Keep an eye on the financial position of the business.
- Take sensible steps to minimise losses if the business faces financial issues.
- File the Corporation Tax (CT) Return (form CT600) with HMRC on time each year. Once again, if you have an accountant, they will usually do this for you.
Further general duties of a director include:
- Pay the Corporation Tax on company profits to HMRC on time each year.
- When the company is VAT registered, complete and file the VAT returns on time. As part of this, also pay the VAT bills to the VAT office on time.
- When the company has a PAYE scheme, file the PAYE forms on time and pay the PAYE and NIC bills to HMRC on time.
- A director must inform Companies House if any of the company’s details change at any time during the year. These changes include the director details and PSC details. It will also include the registered office, the company year-end, and the allotment of new share capital. Nowadays, with the internet, most of these changes can be sent online via the Companies House WebFiling service.
- A director must only declare dividends when there is enough profit in the company to be able to pay these.
- The company secretary or a director must also arrange when the Board Meetings will take place. Such a meeting will consist of the Board of Directors, who will convene to discuss company business. However, for smaller companies such as one that a contractor would run, once per annum, they will hold an Annual General Meeting to approve the accounts etc. They will hold at least one director’s meeting per annum, too, although maybe more if there are several official events during the year that requires a director’s meeting.
Some further general responsibilities are contained within the Companies Act 2006 directors’ duties. These cover various aspects of your business and are:
- They should engage solicitors, accountants, and auditors, if and when required.
- Maintain the office supplies of the company.
- Provide the members (the shareholders and/or the guarantors) copies of the annual accounts.
- Deal with the issue and transfer of the shares in the company.
- If there are any employees, the business must comply with any current employment law.
- The business must adhere to any health and safety aspects.
- They will need to abide by the data protection laws.
- The director will need to comply with any other laws that are subject to the company.
- Directors must not enrich themselves to the detriment of the business.
Please note that if you have an accountant who looks after you and your business, quite a few of the tasks shown above will be taken care of by them on your behalf.
The company’s constitution includes the Articles of Association and any resolutions and agreements made. Although not exhaustive, the Companies Act 2006 definition of ‘constitution’ refers to other documents that form part of the constitution of a company, which includes:
- The certificate of incorporation and any certificates of incorporation on change of name.
- A current statement of capital (or statement of guarantee for a company that is limited by guarantee).
- Any court orders or enactments that alter the company’s constitution.
These documents are important, and the directors or secretary should keep them safe.
Director duties -other factors
When considering the duties of a UK company director, they should not automatically assume that their accountant has to ensure that all company’s official documents are filed correctly and on time. The director’s agreement with their accountant will set out the duties they must look after. However, the final responsibility will always lie with the director.
Please note that accountants, in theory, have a duty to carry out the work that their client has asked them to do. Moreover, many of these will always do so and will do this very well in most cases.
Director duties (UK) -being organised
If you are an organised individual, we have detailed all the filing dates you may need to meet as both a company director and someone who files a Self-Assessment Tax Return.
We have separate guides on Self-Assessment payments on account and common Self-Assessment tax errors. It is a good idea to make diary notes of all important dates for you to track when any payments are due.
Finally, you should also ensure that your accountant is up to date with current working practices and how tax rules affect your particular industry.
In conclusion, all the duties and responsibilities fall with you as the director, covering various areas. Furthermore, you are in charge and need to ensure that your company’s accounts, tax returns, and reports are correct and that you file these on time.
Finally, as a director, it is good practice when you supply the details to your accountant; you send them promptly. If you adhere to this, you will give them time to complete your paperwork for you before any due dates.
Please consider these points if you are considering moving from an umbrella to your own company.
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