If you’ve been appointed the director of a company or you’re set up as the director of your own business, are you sure of your roles and responsibilities?
There are seven key duties that a company director must adhere to. As well as these over-arching responsibilities, a director has obligations, under the Companies Act 2006, to submit to Companies House:
- Your confirmation statement
- Your annual accounts
- Changes to company officers’ personal details
- Changes to the registered office
- Your allotment of shares
- Your registration of mortgage charges
- Changes to people with significant control (PSC)
Although you may not be required to physically carry out these tasks – you can appoint an accountant or company secretary to submit the details – as a director, you’re still legally responsible for the company accounts and performance.
So what are those seven duties that form the basis of a director’s role?
- Follow the company constitution
The company constitution and articles of association are the rules for running the company that is agreed by the directors, company secretary and members. The constitution outlines the powers you have as a director.
- Promote the success of the company
As a director you must always act in the best interests of the company whilst considering the consequences of your decisions, act fairly to members of the company and in the best interests of employees. You are required to maintain your company’s high standards of business conduct and support its relationships with suppliers and customers whilst being considerate of its impact on the environment and the community. Your responsibilities switch to creditors if the business goes bust.
- Use your independent judgement
Although it’s wise to accept advice, it is vital to exercise your own judgement and not be swayed by others in your decisions.
- Utilise care, skill and diligence
Using any specialist skills and knowledge, as a director you are required to perform at a level of at least reasonable diligence, experience, skill and general knowledge.
- Avoid conflicts of interest
Possible conflicts of interest must be shared with other directors and members and the procedure followed as per the articles of association. Even when no longer a director, you cannot use opportunities you learnt about as a director.
- No benefits from third parties
Third-party benefits can lead to a conflict of interest so they can’t be accepted unless agreed as reasonable corporate hospitality.
- Personal interests
As a director, you must tell your fellow directors and members if you will personally benefit from a company transaction, such as a contract with a family member.
These seven key director duties also apply when you’re not active in your role as director, when you take instruction from someone else, if you act as a director but have not been formally appointed or if you control a board of directors without being on it. You are also not allowed to apply confidentiality to company affairs or misuse company property.
It’s vital that directors can prove they’ve fulfilled their legal duties so keep accurate records of board meeting and decisions made for 10 years.
If you have any queries about taking on the role of director and what it entails, speak to the friendly experts at CRM on 01865 379272.