The responsibilities of a company director include general management of the day-to-day strategy and operations of the company, managing the company’s financial records and complying with the various duties laid out in the Companies Act (2006). Generally speaking, everything a director does should be for the success of the company.
A director of a private limited company is appointed by the shareholders and can be both a shareholder and an employee. Their responsibilities are owed to the company itself; shareholders can decide to bring a legal case against a director if they fail to comply with their duties.
What are the general responsibilities of a director?
Company directors are appointed in order to oversee the daily management of their company. In everything they do, they should be acting in the company’s best interests and for its long-term success.
This means that directors are responsible for their company’s strategy, making decisions that will allow it to grow and succeed. These decisions can have both short term and long term implications, with the director ultimately accountable to the shareholders who appointed them.
Directors are also responsible for managing health and safety compliance, record keeping and informing Companies House if anything changes in the structure or management of their company. The director will not always be personally involved with minutiae of how these duties are carried out, but it is important to remember that they are legally responsible for ensuring that they are completed correctly.
What financial responsibilities do directors have?
An important area of responsibility for limited company directors is record keeping and the correct filing of taxes. A team in the company or an external firm will often do most of the work in this area, but it’s the director’s responsibility to ensure that everything is done on time and accurately.
A director must ensure that their business’s accounts are filed correctly, that the corporate tax return is submitted to HMRC in time and that corporation tax is paid in full before the deadline.
Directors also have a responsibility to manage their personal finances correctly, which can be a complicated process if they have multiple sources of income, such as a company salary and shareholder dividends. Directors will need to be registered for self assessment and will have to fill out their tax returns yearly. You can find out more about personal payments in our post on how to take money out of a limited company.
What does the Companies Act (2006) say about directors?
The Companies Act (2006) gives an extensive list of the duties that a director of a limited company is responsible for. All of the responsibilities are guided by the duty to act in accordance with the company’s constitution and to act for the success of the company.
Another key responsibility that the act picks up on is to exercise independent judgment. This doesn’t mean that the director can’t be guided by the constitution and the will of the board; it means that directors must be able to act independently of third parties or conflicts of interest.
Directors have a responsibility to avoid any conflicts of interest that have not been expressly permitted in the constitution or by the shareholders and third party benefits or personal interests are two prime examples of where a conflict of interest might arise. In all areas, directors must act with reasonable skill and diligence and with the interests of the company central.