Key company director responsibilities

Learn what are the responsibilities of a company director - or directors

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We are a team of writers, experimenters and researchers providing you with the best advice with zero bias or partiality. This article was authored by:
  • Alex Novakovic

Running or owning a company is great, the journey is filled with growth, lessons and innovation, but there are key responsibilities that you will need to pay close attention to. These responsibilities fall under the Companies Act 2006, which enforces specific duties on the director of a UK limited company.

These responsibilities are laid out clearly on the official legislation website. Not being aware of them may mean that your company isn’t running as competently as it should and you may incur criminal penalties.

An overview of the responsibilities of a company director:

Act within powers

It is important that you always act in accordance with the company’s constitution, and you should only exercise your power within the boundaries of which they were given.

You will find within the company’s constitution its articles of association (read more about this in our guide to the required documents for forming a limited company), detailing agreements of a constitutional nature and resolutions.

Promote the success of the company

As the director, you must act in a way that will promote the success of the company, for the benefit of all involved, for example, shareholders and employees.

Through strategic planning and a long-term goal to increase the value of the company, it is up to the director/s to make decisions that are appropriate and will navigate the company in the right direction.

During all strategy meetings, where the focus is on promoting the success of the company, the legislation details that a director must consider:

  • the long-term recuperations of all decisions
  • how decisions will affect employees
  • any necessity to forge company relationships with clients, customers, supplier, etc
  • how the company will impact the environment and the wider community
  • the need to maintain a positive reputation of business conduct
  • the obligation to treat all members within the company fairly

The exercise of reasonable care, skill and diligence

You will also be required to have suitable experience, qualifications and skills to run the company successfully.

You may need these skills for the filing of documents to Companies House or HMRC, but do not be deterred here, because there you can forward these responsibilities on to a lawyer or accountant.

Duty to exercise independent judgement

You are required to act independently and confidently make your own decisions.

Doing this does not inhibit you from acting within an agreement the company has entered into or the company’s constitution.

Your duty to avoid all conflicts of interest

You must be careful to avoid any situation that may cause you to act in conflict with the company. The Companies Act 2006, clearly details that this applies to information, exploitation or a possible opportunity (situational or transactional), even if the company could benefit from it.

More examples of conflict:

  • You are a director on the board of a competitor, shareholder, customer or company supplier
  • You hold another advisory position within the company, for instance the accountant
  • You use the company’s information to make a profit
  • You may also be in conflict if any of the above points relates to your partner, spouse, child, parent/s or other members of your family

If for any reason, you believe you may be operating in conflict or about to make a decision that may cause conflict between you and the company, you can speak with members of the board, shareholders or refer to the articles of association.

Not to accept any benefits from a third party

You must take great care not to accept benefits from third parties, for your own personal gain. This also covers the acceptance of gifts from customers or potential clients/contracts and any further exploitation of the business relationship.

This duty can be overlooked if you carefully assess each gift and it can be proven that it will  not pose a conflict of interest between you and the company.

Declare all interest in proposed or current transactions or arrangement

If for any reason, directly or indirectly, you have an interest in a transaction, it is important to declare the nature and the extent of your interest. If the contract has already been entered into, you must declare it as soon as you are interested. Whereas, if the transaction has not yet been completed, you must declare your interest before the transaction takes place.

Please be aware that it is a criminal offence if you fail to declare and interest and you may receive a fine.

Filing duties

Along with all the duties and behaviours directors will need to adhere to, there are a few filing obligations that will need to be completed. These will include

  • Company tax returns
  • Confirmation statements
  • Paying corporation tax

You can read more on these here.

As detailed above you can hire an accountant or appoint a secretary to carryout filing responsibilities. It is also useful to compete these online via Companies House.

Alex Novakovic

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