Directors' Responsibilities

Company Director:

  • May not use his position to further his own interest at the expense of the company, nor give preference to particular creditors.
  • May not accept a loan from the company.
  • May not undertake substantial property transactions with the company without the prior approval of shareholders in general meeting.
  • Must make full disclosure about any dealings with the company.
  • Must ensure that the company is able to pay its debts as and when they fall due. Non-payment of debts is one of the grounds for compulsory liquidation. Civil and/or criminal proceedings against directors may result.
  • May not receive compensation for loss of office without the approval of shareholders.
  • May not award himself a contract of service lasting more than five years unless it is approved by ordinary resolution of the company.
  • In performing his functions must have regard to the interests of the company's employees in general.
  • May become personally liable to contribute to the assets of the company in a liquidation.
  • May be liable for failure to keep proper accounting records or for destruction or falsification of any documents.

A Director may be held liable for:

  • The cause of the company's insolvency.
  • The company's failure to supply goods and services for which whole or part payment has been made.
  • Failure to call a creditors' meeting.
  • Failure to prepare and approve annual accounts.
  • Failure to call necessary meetings of members/directors.

A Director is responsible for:

  • The appointment of a company secretary.
  • The preparation of the accounts in accordance with the Companies Act 1985, and ensuring that these are audited (subject to the requirements for small companies).
  • Ensuring that the company keeps 'proper books and records' to record its accounting transactions.
  • Preparation of group accounts.
  • Ensuring that the annual return is prepared and submitted on time.
  • Ensuring that the statutory books are maintained.
  • Holding AGM's and EGM's.
  • Declaring a dividend.
  • Signing share certificates - two need sign or one director and secretary.
  • Signing the balance sheet - only one need sign.
  • Signing the directors' report.
  • Filing notices of change of directors or secretaries.
  • Filing notices of change of registered office. It is important to be aware of automatic and unavoidable fines for the late filing of accounts, annual returns or other forms.

Shadow Directors

Section 741 of the Companies Act 1985 defines 'director' to include 'any person who occupies the position of director, by whatever name called'. Thus, certain employees, shareholders, servants, officials or agents of a company, or indeed sales, regional or associate directors of a company may, by virtue of holding themselves out as directors, find they have taken on the same responsibilities and liabilities as ordinary directors.

Role of a company director

Can anyone be a director?

Generally it is up to the members to appoint the people they believe will run the company well on their behalf. The only restrictions that prevent anyone becoming a director are:

  • the person must not have been disqualified by a court from acting as a company director (unless he or she has been given leave (permission) to act by a court for a particular company);
  • the person must not be an undischarged bankrupt (except with leave of the court);
  • in Scotland, anybody under the age of 16

What responsibilities does a director have towards Companies House?

Every company director has a personal responsibility to ensure that statutory documents are delivered to the Registrar as and when required by the Act. In particular:

  • accounts (only for limited companies);
  • annual returns (Form 363);
  • notice of change of directors or secretaries or in their particulars (Forms 288a/b/c); and
  • notice of change of registered office (Form 287).