Limited company director duties and responsibilities

When you become a director of a limited company, you are entrusted with a number of responsibilities and duties, to ensure that you run the company properly, and comply with company law and a wide range of rules and regulations which cover everything from paying your tax on time, to how you treat any employees.

Companies House responsibilities

In order to become a company director, you must be over 16, not be disqualified from being appointed as a director, or be an undischarged bankrupt. There are no other restrictions. In fact, you don’t even need to be an employee or shareholder of the company in order to become one of its directors.

The directors of each limited company must fulfil the following duties:

• Complete the Annual Return (AR01) form, which provides Companies House with a snapshot of the company at the time of filing.
• Provide a report of the company’s annual accounts.
• Notify of any changes to the company’s personnel (names, addresses, appointments or resignations), or the company’s registered address. Many of these tasks can be performed online, via WebFiling.
• Inform Companies House of any registration of charges (the security the company provides for a loan – such as a mortgage), or allotment of shares.

General duties of directors

These key duties are contained in the Companies Act 2006:

• 1. A duty to act within their powers, and must act in accordance with the company’s constitution.
• 2. A duty to promote the success of the company (including considering the interests of the company’s employees, the community and environment, the company’s reputation, and the company’s members).
• 3. A duty to exercise independent judgment.
• 4. A duty to exercise reasonable care, skill and diligence, to a degree expected of someone with the knowledge, skills and experience of a given director.
• 5. A duty to avoid conflicts of interest.
• 6. A duty not to accept benefits from third parties – to avoid potential conflicts of interest, and accusations of bribery, for example.
• 7. A duty to declare interest in proposed transaction or arrangement – again, to minimise any potential conflicts of interest.

Financial Responsibilities

The company’s directors are responsible for ensuring that the company’s accounts are accurate and that these accounts and any outstanding tax are submitted on time. Although your accountant will most likely undertake the preparation work, and submit the relevant forms, the directors’ are ultimately responsible in the eyes of the law.

Other Responsibilities

Alongside the statutory and financial duties of a company director, some of the other responsibilities include:

• Complying with current law regarding the hiring and treatment of employees.
• Ensuring that the company complies with Health and Safety regulations.
• Ensuring that the company is adequately insured. Some types of insurance cover may be mandatory.

Further Information

Companies House has a number of helpful guides, particularly guide GP3 on the life of a company.

The Companies Act 2006 – read Part 10 for information specifically covering the responsibilities of company directors.