What Are The Legal Duties Of A Limited Company Director?
You should know what your tasks and responsibilities are as a director if you want to start a limited company and work for it. Along with running your business every day, you’ll need to send yearly records and a confirmation statement to Companies House every year. Also, you need to let your company know about any changes that happen and stay up to date on any changes to UK business law. As a director or manager of a company, you will share some personal information with the public in exchange for limited responsibilities. It’s important to know what kinds of personal details can be found on the Companies House record. This blog is written to make you understand what a company director is and what are the legal duties of a limited company director.
What Is A Company Director?
Before going towards the topic, what are the legal duties of a limited company director? Here is an explanation of what a company director is. A director is someone who is in charge of running a limited company daily. This role includes all business, financial, and legal management tasks. Limited company directors are called “officers” of the company, along with company managers. The people who own the company (shareholders or guarantors) choose the directors. Members often choose to be owners of their businesses, especially small ones. This means they are fully responsible for running their businesses. The law in the UK says that all private limited companies must always have at least one “natural” member. As long as there is already at least one natural director, corporate groups can also be made directors. Public limited companies, on the other hand, must always have at least two shareholders.
What Are The Legal Duties Of A Limited Company Director?
How can we find out what are the legal duties of a limited company director? The Companies Act of 2006 says that directors have seven main duties or responsibilities to their company:
Act Within Your Power
- Directors must obey the rules set out in the company’s law, which is mostly the articles of association. Going beyond this level of power could lead to decisions being reversed and even personal liability.
Encourage The Company To Do Well
- Directors have to be honest and work for the good of the company’s members, who are called shareholders. This means considering the long-term effects on society, the environment, workers, suppliers, and customers when making decisions.
Utilise Their Opinions
- Directors must work with the same care, skill, and dedication as others in similar positions. opinions of others without doing your research first.
Use A Fair Amount Of Care, Skill, And Effort
- Directors must work with the same care, skill, and dedication as others in similar positions. When it comes to these kinds of things, directors with special skills should be held to a higher standard.
Avoid Having A Conflict Of Interest
- Directors should stay away from cases where their personal goals clash with those of the company. Any possible problems must be made public, and steps must be taken to handle them properly.
Avoid Any Rewards From Outside Sources
- Gifts and other benefits from outside sources cannot influence decisions. The decisions that directors make must be free from external influences.
Expression Of Interest In A Planned Deal Or Trade
- Directors have to say if they have any ties to a possible deal or exchange with the company. This approach keeps things clear and helps keep conflicts of interest from happening.
Statutory Records Maintained By A Company Director
While considering what are the legal duties of a limited company director, the maintenance of statutory records is included in the company director’s responsibilities. Directors are liable for business filing and reporting requirements. Some directors appoint accountants or corporate secretaries to undertake these tasks:
- Companies should register for corporation tax with HMRC within three months of economic activity. They may also need PAYE and VAT registration. Dormant enterprises pay no taxes.
- Annual confirmation statements must be completed and sent to Companies House (the UK Registrar of Companies) online or by mail. This document confirms and updates critical company data. Annual reports highlight commerce and revenue. They are usually ready for Companies House and shareholders at the end of the financial year on a 12-month cycle. Small enterprises can provide simplified records. Every firm must submit “statutory” accounts to HMRC with its annual company tax return.
- After each 12-month corporation tax accounting period, HMRC must receive a company tax return online. Full statutory accounting was required. We calculate the company’s corporation tax using the tax return and accounts. The filing deadline is twelve months after each accounting period.
- Companies pay corporation tax on all taxable income. This tax covers all taxable revenue in an accounting period, usually twelve months. HMRC must receive taxes nine months and one day after the accounting period.
For more information regarding annual confirmation statement, check our blog:
Limited company directors must notify Companies House of any changes to the following information
- Details of directors
- Information about company secretaries, directors, registered office, business name, accounting reference date, share capital, and shareholders.
- The PSC register records individuals with standard industrial classifications (SIC codes).
- The public registry changes reflect reported changes. The process usually takes 24 hours.
Directors must keep various financial and commercial records at the firm’s SAIL address. These include
- Member lists
- Directors lists
- Registered director of residential residences
- List of corporate secretaries
- Person with significant control (“PSC”) registration
- Meeting minutes
- Business goals
- Records of every credit, obligation, and sale
- Bank reports, contracts, business establishment paperwork, and share certificates.
For further information on the topic PSC read our Blog:
Statutory registers must be available for public inspection at the registered office or SAIL location. Directors must tell Companies House where these vital registers are.
- Companies must always have a registered office in their home nation. Public documents reveal this address. Companies House, HMRC, and other government agencies use registered offices to send statutory letters and notices to firms. Companies House must be notified immediately of the SAIL records used. Any records that move from the SAIL address to the registered office or vice versa must be notified, as must any location changes.
- The company’s full name must be displayed at the registered office and trading sites. For now, this prohibition does not apply to private residences. The complete firm name must appear on all official business correspondence, including emails and websites. They must include the company’s registration number, registered office address, and country of establishment on their websites, mailings, and order forms.
More detail you want to know about SAIL address or registered address, go check our blog:
If A Director Fails To Perform His Duties
After understanding what are the legal duties of a limited company director now it’s time to understand what happens if a director fails to fulfil their duties. Limited company directors can be removed from their position without notice if they are found to be violating any legal responsibilities, contracts, or fiduciary duties related to that position. The court also has the authority to discard and disqualify a director labelled as “unfit”. An absence of wilful negligence towards duties can lead to civil prosecution. Fines are also applicable to businesses for the late submission of requisite accounts and tax declarations. In more extreme cases, companies can go through dissolution, which then enables them to register as struck-off.
Conclusion
Before you become a director of an important limited company, you should understand what are the legal duties of a limited company director. Directors ensure that the company complies with UK law and makes plans for its long-term success, so they are more than just bosses. One of the many duties of a director is to exercise their official authority and keep official records. There could be serious consequences for neglecting these obligations, including fines, termination from the project, or even legal action. When directors stay alert and take action, they protect themselves and help the company grow in a way that is moral, open, lawful, and easy to comprehend.
Disclaimer: All the information provided in this article on Legal Duties Of A Limited Company Director, including all the texts and graphics, is general in nature. It does not intend to disregard any of the professional advice.