If you decide to start trading via your own limited company, you may at first be put off by the perceived ‘hassle’ associated with being running the company and becoming a director. However, if you hire a reputable accountant and undertake some basic administrative tasks, you should find that you can manage your company’s affairs with ease.
What is a company director?
All UK limited companies must have at least one director. Before the implementation of the Companies Act 2006, companies also had to appoint a company secretary, however, this is no longer the case.
The initial director(s) is/are appointed during the initial company formation process, however, company officers can be changed with ease – by notifying Companies House, the registrar of companies. These days, all information relating to your company can be updated online.
Who can be a company director?
Anyone can be a director, as long as they are:
a) Over 16 years old.
b) Not an undischarged bankrupt.
c) Not disqualified from acting as a company director for whatever reason.
You don’t need to be a shareholder of the company to be a director.
In practice, many limited company contractors are sole directors or co-directors with other fee-earners, or often a spouse will serve as a second director.
What are my practical responsibilities as a director?
Each year, the directors must submit a number of documents to Companies House.
a) You must complete and submit the company’s Confirmation Statement to Companies House each year, which provides basic information about the company, its personnel, and its shareholders.
This is typically due on the anniversary of the company’s incorporation date, although you can update the Statement at any time.
Like its predecessor, the Annual Return, failure to file on time will result in penalties, so this is one deadline you really must not miss.
b) You must provide Companies House (and HMRC) with copies of your Annual Accounts. Although your accountant will be responsible for the preparation, the company’s directors are ultimately responsible for ensuring the accuracy of accounts, and meeting the statutory filing deadlines.
c) You must inform Companies House of any changes to the company’s officers, share structure, or registered address. This would include the appointment or termination of a company director, to notify of registration of charges, if you decide to issue a new class of shares, or if you change the company’s registered address. Many of these changes can be updated using the WebFiling service (or ask your accountant to make any changes on your behalf).
What are my general responsibilities as a director?
As a company director, you have a number of responsibilities to the company itself, any employees you may have, and your shareholders.
The main responsibilities are as follows – both those stated in the Companies Act 2006, and more general responsibilities:
- You must follow the company’s rules, as laid out in its Articles of Association (which acts as the company’s ‘constitution’).
- You must try to make the company successful, using your own abilities, skills and independent judgement.
- There must not be any conflicts of interest between those of the company, and its directors.
- Keep accurate records, and meet all the company’s deadlines (as mentioned above).
- All company directors must register for self-assessment, and fill in a tax return by 31st January each year.
- Directors must declare an interest in potential transactions or arrangements, if they arise.
- Directors must not accept bribes from third parties.
- You must ensure that the company’s accounts are accurate, and submitted on time.
- The directors must comply with the prevailing Health & Safety regulations.
- The directors must comply with employment laws when hiring and firing staff.
- Make sure that your company is insured, where necessary.
The role of your accountant
These responsibilities may seem a little onerous, but they have been created to apply to companies of all sizes – including major corporations.
In practice, the time you will need to spend on company administration is minimal as a director of a small limited company.
All practical tasks will typically be carried out by your accountant (such as preparing your company accounts, submitting your Confirmation Statement, and keeping Companies House updated with any changes).
However, the company’s directors are ultimately responsible if mistakes are made, or deadlines are missed.
For this reason, we’d recommend you should take some time to understand how your accounts are compiled and keep a note of your annual company deadlines.
You might also be interested in reading our guide to shares and shareholders.
You can set up a limited company from just £10.95 via Clever Formations.