What Are The Responsibilities Of A Director Of A Limited Company?

The directors of a limited company are the people who run it, and have numerous duties to the company which are enshrined in the Companies Act 2006.

These include duties to avoid conflict and declare interests where appropriate, to exercise reasonable care and skill, use good judgment and act within your powers.

What does this mean in the real business world? In addition to using general good business sense and decent moral values, a director must take care of:

• health and Safety requirements. The extent of these depends on what industry the company is involved in. Even in a low risk office environment, you will still be obliged to carry out risk assessments and to consider the health and safety of your employees;
• tax obligations. The directors need to make sure that the company complies with its obligations to calculate and pay corporation tax, VAT, and National Insurance.
• employment law obligations. Directors must ensure that they and the company comply with employment law. These obligations include not discriminating against people, following grievance procedures and will soon include automatic enrolment in pensions;
• obligations to Companies House. Directors must ensure that various documents are produced and that activities are reported in a timely manner to Companies House. The documents that need to be produced include an annual return, which is a report that details changes in shareholding and directorships and summarises who owns which shares. Companies are also obliged to submit annual accounts, although there are exemptions for very small companies. Directors must also ensure that charges are registered.

The administrative responsibilities for the above tasks are typically delegated to others. For example, larger companies may delegate day to day responsibility of employment issues to their Human Resources department, and their tax obligations to an Accounts team. However, this does not absolve them of ultimate responsibility.

For the reporting requirements to Companies House, there is often a Company Secretary. However, unless the company's Articles of Association make specific reference to one, since 2006 there is no legal obligation for private limited companies to have one. Public limited companies on the other hand cannot benefit from this exemption and must have a company secretary.

A Company Secretary can be a director of the company, but does not have to be. Often, in small businesses the tasks typically assigned to a Company Secretary can be outsourced to a professional firm offering this service.

Even where a Company Secretary has been appointed, the ultimate responsibility for the tasks rests with the directors.

Who can be a director?

There are a number of restrictions on who can be a director.

• Directors must be aged 16 or over.
• Directors cannot be undischarged bankrupts, unless they have been given specific permission by the court to act in these circumstances.
• A person who has been disqualified from being a company director cannot be appointed as one unless or until the disqualification has been lifted.

Providing that a person does not fall in to any of the above listed categories then they are eligible to be listed as a company director,