As a director of a UK company, it is important to understand your legal responsibilities. The Companies Act 2006 sets out the duties of company directors, which are designed to protect the interests of shareholders and the wider public. We will discuss the key responsibilities of UK directors.
When a director is running a business, they are likely to be doing many roles such as accounting, advertising, sales and business development, all at the same time. Therefore, many decisions are made by a company director on a daily basis.
Act in the Best Interest of the Company
Directors have a legal duty to act in the best interests of the company. This means that they must make decisions that are in the best interests of the company, even if this is not in their personal best interests.
Promote the Success of the Company
Directors must act to promote the success of the company, which includes considering the long-term impact of their decisions. This duty is owed to the company as a whole, rather than to individual shareholders or directors.
Exercise Reasonable Care, Skill, and Diligence
Directors must exercise reasonable care, skill, and diligence in carrying out their duties. This includes keeping up to date with the company’s affairs, understanding the company’s financial position, and seeking professional advice where necessary.
We handle these matters as part of our Company Secretary and Registered Office support.
Avoid Conflicts of Interest
Directors must avoid conflicts of interest between their personal interests and the interests of the company. This means that directors must not take advantage of any opportunities that arise from their position as a director, without the knowledge and consent of the other directors.
Maintain Proper Accounting Records
Directors are responsible for maintaining proper accounting records, which accurately reflect the financial position of the company. This includes keeping accurate and up-to-date records of all transactions, as well as preparing annual financial statements.
Ensure Compliance with Legal Obligations
Directors are responsible for ensuring that the company complies with all legal obligations, including company law, tax law, and health and safety regulations. This includes ensuring that the company files all necessary statutory returns, and that the company’s accounts are audited where necessary.
Delegation of directors’ duties
Directors have the right to delegate some of their duties to others (such as a company secretary) but the ultimate responsibility to comply with them lies with them.
The other thing to remember is that company directors do not have to be located in the UK to fulfil their duties. They do not have to live in the UK, but companies must have a UK registered office address. Director’s names and personal information are publicly available from Companies House. Directors must provide a service address which will also be publicly available.
In conclusion, UK directors have a range of legal responsibilities, which are designed to protect the interests of shareholders and the wider public. Directors must act in the best interests of the company, promote the success of the company, exercise reasonable care, skill, and diligence, avoid conflicts of interest, maintain proper accounting records, and ensure compliance with legal obligations.
If there is a failure to comply with such duties this may result in personal civil and criminal liability as well as disqualification from acting as a director. It is no defence to claim ignorance towards a failure to comply. A company can offer a degree of protection against such liability by giving indemnities and taking our insurance against any liability incurred by the directors.
It is important for directors to be aware of these responsibilities and to seek professional advice where necessary to ensure compliance with the law.