Incorporating your business as a limited company or being appointed as a director for the first time is an exciting opportunity – but there are various fiduciary responsibilities and legal requirements you need to adhere to.
Much of the legislation is included within The Companies Act 2006, which sets out your duties around things such as:
- Participating in board meetings
- Ensuring the company meets statutory obligations
- Managing company affairs on behalf of the shareholders
For many small businesses, the director is also a shareholder. However, this does not remove any level of responsibility, so even if you hold both positions, you need to fulfil your obligations and duties, switching hats between the roles as needed.
General Director Responsibilities
General duties refer to the scope of your directorship. In simple terms, you need to act on behalf of the business, not in the interests of an individual shareholder (even if that shareholder is yourself!).
Your decision-making must comply with the company’s constitution, which includes the Articles of Association and any other agreements, most of which will remain unchanged from the time the company was first incorporated.
Other areas of responsibility include:
- Supporting the company objectives by making sound decisions to ensure the business succeeds and thrives. For example, you might need to choose the right strategy to build a strong reputation, implement policies to protect staff, or make long-term plans to create robust relationships with customers and suppliers.
- Using professional judgement. Although that might be difficult to quantify, you should never make a decision that is not in the interests of the business, often by seeking professional advice from an accountant or solicitor, depending on the nature of the decision.
- Show reasonable care and diligence. A director has a great deal of authority, so they must apply appropriate knowledge and experience to their work and conduct.
Some general duties are more direct and concern conflicts of interest. Directors must declare any conflicts, such as a shareholding in a business the company trades with, refuse third-party incentives, and avoid any situations that might influence their decision-making.
The Financial Duties of a Company Director
The general duties of directors focus on conduct. In contrast, financial responsibilities dictate tasks and declarations you need to make – all formal documentation, filed accounts and tax returns require a director's signature to be valid.
Where you do not compile reports or returns, you must still approve and authorise the documentation being filed, so you must apply due diligence to verify the accuracy and content of these filings before you sign.
Although this is not an exhaustive list, directors are responsible for the following:
- Filing annual Confirmation Statements with Companies House. These statements verify details such as the company ownership structure and are filed annually.
- Assigning a registered address and updating this accordingly if it changes.
- Maintaining records of transactions, inventory and VAT payments or collections, ensuring VAT and Corporation Tax returns are correct and complete.
- Submitting year-end accounts, VAT returns where relevant, PAYE and CIS reports and making tax remittances on time and in full.
Directors’ duties cover a broad remit, and the majority of directors work alongside management teams, accountants, advisers, and payroll clerks – but the responsibilities remain with you, regardless of how you outsource the work and to whom.
Although, as a director, you have a duty to fulfil all these requirements, there is no expectation that every director will personally compile year-end accounts, conduct physical stock takes and prepare payroll runs.
Most delegate everyday bookkeeping and sale or purchase transactions to in-house teams or work with an accountancy team such as SAS Accounting to manage their regulatory compliance, file or audit year-end accounts, and advise when a tax return is due.
If you need any advice about fulfilling your duties as a director, managing your financial responsibilities, or which returns and reports you need to submit, please contact us at your convenience.
