There are several reasons why you and your business may benefit by trading as a corporate entity. These include tax efficiency, prestige or credibility within the business world and, of course, limited financial liability.
In all cases however, you should remember that being a director of a company carries with it certain obligations and you as an individual can be penalised if those responsibilities are not met.
What is a Director?
A director is a person who has been appointed to take charge of the running of a company. There is no limit to the number of directors who can hold office, but there must be at least one, and they must be over 16 years of age. Individuals who are un-discharged bankrupts are not permitted, nor can anyone who has been previously disqualified as a director.
What are the Statutory Responsibilities of a Director?
A director is responsible for preparing and filing certain documentation relating to the company’s activities. Companies House requires that directors file by a given deadline:
- Annual Returns – giving details of the directors, company secretary, shareholdings and registered office.
- Annual Accounts – showing the company’s financial position and trading activities (even if none have taken place).
- Reports of any change in details such as allotment of shares, change of address, appointment or resignation of directors or company secretary.
It is possible to delegate these duties to someone else but the ultimate responsibility for them still lies with the director.
What are the Legal Responsibilities?
Company law states that a director MUST:
- Ensure the company complies with the terms set out in its Article of Association.
- Act with the intention of making the company a successful enterprise, using his skills to benefit the company and not himself.
- Ensure that the company complies with Employment Law, Health and Safety Regulations and that it meets its obligations to HMRC with regard to Taxation, VAT, National Insurance, etc.
- Declare any beneficial interest in any activity undertaken by the company.
- Keep adequate records of the company’s activities including trading transactions, monies withdrawn from company funds, and declaration of dividends paid to shareholders.
- Hold director’s meetings and keep minutes of any decisions made on any matter concerning the company or its shareholders.
What if I Don’t Carry Out These Duties?
There are legal and financial penalties for directors who fail in their duties. These depend on the circumstances and the severity of the non-compliance but can range from fines to criminal charges and can result in disqualification at court or even being made personally liable for company debts, if they are deemed to be as a result of a director’s negligence.
Green & Co are always happy to advise and assist directors in the course of their duties and offer company secretarial and registered office services for all corporate clients. For more information contact us.
Please note: This article is a commentary on general principles and should not be interpreted as advice for your specific situation.