What are the Duties of a Company Director?

A company director has crucial roles and responsibilities in shaping the success and compliance of a business. They are legally responsible for running the company and ensuring that all necessary information is sent to Companies House on time. This includes filing the confirmation statement, annual accounts, changes in company officers or their personal details, changes in registered office address, allotment of shares, registration of charges, and changes in people with significant control. 

Key Takeaways:

  • A company director has important roles and responsibilities in a business.
  • Directors are legally responsible for running the company and maintaining compliance.
  • They must ensure that all necessary information is sent to Companies House on time.
  • This includes filing various documents and notifying changes within the company.
  • Even with professional help, company directors remain legally responsible for company records, accounts, and performance.

General Duties of a Company Director

There are seven general duties outlined in the Companies Act 2006 that a Company Director must adhere to. These duties include:

  1. Acting within the powers as stated in the company’s constitution
  2. Promoting the success of the company
  3. Exercising independent judgement
  4. Exercising reasonable care, skill, and diligence
  5. Avoiding conflicts of interest
  6. Not accepting benefits from third parties
  7. Declaring any interests in transactions involving the company

These duties are statutory and all directors are required to fulfil them. Acting within your powers means following the guidelines and regulations set forth by your company’s constitution. They must promote the success of the company by making decisions that benefit its long-term growth and stability. In doing so, they must exercise independent judgement and reasonable care, ensuring that their decisions are well-informed and made in the best interest of the company.

Avoiding conflicts of interest is crucial as a director. They must not put themselves in a position where their personal interests may conflict with those of the company. Similarly, company directors must not accept any benefits from third parties that could compromise their ability to act in the best interest of the company.

Finally, it is important for directors to declare any interests they have in transactions involving the company. This includes disclosing any personal or financial relationships that may influence their decision-making. By fulfilling these duties, they contribute to the overall transparency, integrity, and success of a company.

Related reading: How much does it cost to add a director to a company?

Directors’ Duties in Promoting Company Success

One of the key duties of a director is to act in a way that promotes the success of the company. This involves considering the long-term consequences of decisions and prioritising the interests of employees. Additionally, directors must foster strong business relationships and ensure that the company’s operations have a positive impact on the community and environment. Upholding high standards of business conduct is essential, and directors should act fairly towards all members of the company.

Long-Term Consequences

Directors must have a forward-thinking approach and consider the long-term consequences of their decisions. This involves making strategic choices that will benefit the company in the long run, even if they may not yield immediate results. By taking into account the potential impact on the company’s growth and profitability, directors can steer the organisation towards sustainable success.

Interests of Employees

Directors have a responsibility to safeguard the interests of employees. This includes ensuring fair employment practices, providing a safe and conducive work environment, and fostering a culture of employee engagement and development. By prioritising the well-being and growth of employees, directors can promote a motivated and productive workforce, ultimately contributing to the success of the company.

Business Relationships

Building and maintaining strong business relationships is crucial for the success of any company. Directors need to nurture relationships with suppliers, clients, partners, and other stakeholders. By cultivating positive and mutually beneficial relationships, directors can promote collaboration, attract new opportunities, and enhance the reputation of the company.

Impact on Community and Environment

Directors must be mindful of the impact of the company’s operations on the community and environment. This involves implementing sustainable practices, minimising ecological footprints, and actively contributing to the social well-being of the community. By prioritising corporate social responsibility, directors can enhance the company’s reputation, build trust, and create a positive impact on society.

High Standards of Business Conduct

Directors play a crucial role in upholding high standards of business conduct. They must ensure compliance with applicable laws, regulations, and ethical standards. By promoting a culture of integrity, transparency, and accountability, directors can safeguard the company’s reputation, inspire trust among stakeholders, and attract potential business partners and investors.

Fair Treatment of all Members

Directors have a duty to act fairly and impartially towards all members of the company. This means making decisions based on objective criteria and avoiding favouritism or discrimination. By fostering an inclusive and equitable working environment, directors can promote a sense of trust, loyalty, and commitment among the company’s members.

Ways Directors Promote Company SuccessImpact
Prioritising long-term growthEnsures sustainable success and profitability
Safeguarding employee interestsMotivated and productive workforce
Building strong business relationshipsCollaboration, new opportunities, enhanced reputation
Implementing sustainable practicesPositive impact on the environment and community
Upholding high standards of business conductEnhanced reputation, trust, and attractiveness to stakeholders
Acting fairly towards all membersInclusive and equitable working environment

Responsibilities and Obligations of a Company Director

A company director has various responsibilities and obligations. It is essential to understand and fulfil these duties to ensure the smooth operation and compliance of a company.

Management Duties

One primary responsibility as a director is to actively manage the day-to-day activities of the company. This includes making strategic decisions, overseeing business operations, and ensuring efficient management of resources.

Statutory Filing Obligations

They are legally required to fulfil various statutory filing obligations. These obligations include maintaining accurate registered details, such as the registered office address and the details of company officers. Additionally, directors must file annual accounts, confirmation statements, and tax returns with Companies House within the specified deadlines.

Maintaining Financial Records

It is crucial to maintain accurate and up-to-date financial records for a company. This includes keeping track of income and expenses, ensuring proper bookkeeping, and preparing financial statements in compliance with accounting standards.

Arranging Meetings

A director is responsible for arranging and conducting meetings of the company. This includes scheduling board meetings, general meetings, and directors’ meetings. They should also ensure that minutes of these meetings are taken and distributed to relevant parties.

Appointing Professionals

To effectively manage the company, they may need to appoint professionals such as solicitors and accountants. These professionals can provide legal and financial expertise to support your decision-making process and ensure compliance with relevant laws and regulations.

Maintaining Company Stationery

A director is responsible for maintaining and updating company stationery, including letterheads, business cards, and official documentation. This helps create a professional and consistent image of the company.

Complying with Employment Law

If a company has employees, directors have an obligation to comply with employment law. This includes ensuring that employment contracts are in place, following fair recruitment practices, complying with health and safety regulations, and providing a safe and inclusive work environment.

Responsibility/ObligationDescription
Management DutiesManage day-to-day business activities
Statutory Filing ObligationsFile annual accounts, confirmation statements, and tax returns
Maintaining Financial RecordsMaintain accurate and up-to-date financial records
Arranging MeetingsSchedule and conduct company meetings
Appointing ProfessionalsEngage solicitors, accountants, and other professionals
Maintaining Company StationeryUpdate and manage company stationery
Complying with Employment LawEnsure compliance with employment legislation

Appointment and Role of Directors in a Company

In a company, the appointment and role of directors play a crucial part in its operations and success. Understanding the various aspects of directorship is essential for anyone involved in running or setting up a company.

Minimum Age Requirement

According to UK company law, an individual must be at least 16 years old to become a director of a company.

Single Director Company

A company can be formed and run by a single director. This option is suitable for individuals who want full control and decision-making authority over their business.

Multiple Directors and Shareholders

In contrast to a single director company, a company can have multiple directors and shareholders. This is often the case when there are multiple individuals or entities involved in the management and ownership of the company.

Natural Director

A natural director is an individual who serves as a director of a company, as opposed to a corporate director who represents a legal entity.

Corporate Director Ban

It is important to note that the appointment of corporate directors is subject to certain restrictions. Since 2016, it is no longer permissible for a company to have only corporate directors. At least one director must be a natural person.

Directors’ Details on Public Record

Companies House, the UK government’s official register of companies, maintains a public record that includes directors’ details. This information, including personal details such as names and addresses, is accessible to the public.

Appointment and Role of DirectorsMinimum Age RequirementSingle Director CompanyMultiple Directors and ShareholdersNatural DirectorCorporate Director BanDirectors’ Details on Public Record
DefinitionA company can have a minimum of one director who must be at least 16 years old.A company formed and run by a single director.A company with multiple directors and shareholders.An individual serving as a director of a company.Restrictions on the appointment of corporate directors.Directors’ details, including personal information, on the public record.

Conclusion

A company director holds significant roles and responsibilities that contribute to the compliance and success of the company. It is their duty to fulfil legal obligations, make informed decisions, promote the company’s success, and manage its day-to-day activities. By understanding and fulfilling these duties, directors play a vital role in the growth and prosperity of the company.

The roles and responsibilities of a company director include ensuring timely and accurate filing of necessary documents, maintaining company records and accounts, and complying with employment law. They also have a duty to act in a way that promotes the long-term success of the company, considering the interests of employees, fostering business relationships, and adhering to high standards of business conduct.

For further guidance, get in touch via the contact form to see how Boardroom Advisors can help you.

FAQ

  What is the role of a company director?

A company director is responsible for the management of a company, ensuring that the company complies with all legal duties and statutory requirements.

What are the legal duties of a company director?

A company director has a fiduciary duty to act in the best interests of the company, avoid conflicts of interest, and ensure that the company operates within the law.

What is a non-executive director?

A non-executive director is a member of the board of directors who is not involved in the day-to-day management of the company but provides independent oversight and guidance.

How do you set up a limited company?

To set up a limited company, you need to register the company with the Companies House, appoint at least one director, and have articles of association outlining the company’s structure and operations.

What are the duties of a company director under the Companies Act 2006?

The Companies Act 2006 sets out the legal duties of company directors, including duties to act within their powers, promote the success of the company, exercise independent judgement, and avoid conflicts of interest.

Can a company director also be a company secretary?

Yes, a company director can also take on the role of a company secretary, but it is not a legal requirement. The company secretary is responsible for administrative tasks and ensuring regulatory compliance.

What is the definition of a company director?

A company director is an individual elected or appointed to the board of directors of a company, responsible for making strategic decisions and overseeing the management of the company.

Written by: John Courtney

John is highly ranked in the Top 100 UK Entrepreneurs list by City AM and is winner of the Lifetime Achievement Award from techSPARK. He has been a Board Director himself for over 40 years and first started placing Non-Executive Directors over 25 years ago. John founded and ran seven of his own businesses including a Management Consultancy for 10 years, a Corporate Finance offering for 10 years and a mid-sized Digital Agency for another 10 years.