A guide to company Directors

Company Directors' duties and responsibilities can be far reaching, and may have influence over many aspects of the day to day running of a business as well as looking at the future growth and success of the enterprise.

Depending on the size of a company, you could have just one director, or you could have several. In most cases within an established company there will be a board of directors who are primarily responsible for:

Setting up company policy, outlining goals and objectives, and then monitoring progress towards meeting these goals
Appointing senior staff, line management and project managers
Being accountable to company shareholders
The managing director (MD) or chief executive officer (CEO) is the person responsible for the overall performance of the company. They report directly to the chair or the board of directors.

Company Registration

When you officially register your company, the first company directors are appointed at the same time. The person or persons you nominate as directors are named in form IN01 and will then be deemed to have been appointed as your company's first directors. For example, when your register your company with Your Company Formations and name your company director or directors, each new director will be asked to provide their full name, address, date of birth, nationality, country of residence, former names and business occupation. This is standard information to be included in the relevant form which the director will be required to sign to signify consent to act as a director.

You can make subsequent appointments through submission of form AP01, and new directors coming onboard will be governed by the company’s articles of association. Normally the company's articles will outline the board of directors responsibilities to hire staff or to appoint additional directors up to the maximum number specified by the articles.

A director can file a service address with Companies House as well as his or her home address. It will be the service address that appears on the public record, and personal addresses will be kept private.

A company director must also give general notice of any interests in any contracts held that involve the company. Directors of quoted PLCs are required to state any declaration of interest in the company’s shares under the Disclosure and Transparency Rules.

As a rule, new directors are given a copy of the company's memorandum and articles of association, and details of the business and affairs of the company, including board meeting minutes, and statutory report and accounts covering the past two years.

What powers do company directors have?

Generally speaking, directors responsibilities cover the management of your company, and are able to exercise all the powers within the company. Their authority may be limited by the constraints of the Companies Act 2006, and also by the articles of association. As an example, a director may not be able to authorise any borrowing or finance on behalf of the company without the agreed consent of the other board members. Rule such as these are usually written into articles of association.
Company directors normally act as a collective with other board members to discuss and agree issues and concerns. This does not mean that a single company director is completely powerless without the rest of the team. The articles of association may allow the board of directors to delegate powers to individual company directors where appropriate or necessary, for example sending just one board member to represent the company at regular meeting to deliver decisions, or to negotiate deals.

What sort of duties do company directors perform?

There are statutory duties that directors need to perform in their capacity as company directors. Ultimately, the directors are responsible for ensuring that the company complies with statutory controls they have to comply with in the eyes of the law.

According to the rules set out in The Companies Act 2006, there are certain common law and equitable duties that new directors have to follow. The Act sets out seven general duties of directors which are:-

to act within powers in accordance with the company’s constitution and to use those powers only for the purposes for which they were conferred
to promote the success of the company for the benefit of its members
to exercise independent judgement
to exercise reasonable care, skill and diligence
to avoid conflicts of interest
not to accept benefits from third parties
to declare an interest in a proposed transaction or arrangement

One of the main statutory responsibilities that company directors must adhere to is the preparation of the company accounts and the report of the directors given to shareholders, as well as the subsequent filing of the accounts and directors report with the Registrar of Companies at Companies House. The directors have to ensure that the company maintains full and accurate accounting records.

If the company is found to have failed in carrying out its statutory duties, then as a result the company directors may be liable to penalties. However, the board may have a defence if they believed that the duties were given to a competent person to complete, but were somehow mislead.

The liabilities that directors may incur for their acts or omissions in directing the company could result in personal liability, both civil and criminal. If found liable, then according to the Company Directors’ Disqualification Act 1986, a person could be disqualified from acting as a director of a company for a period of between two and fifteen years.

This article lists only a few of the main duties, responsibilities and liabilities of a company director. If you are in need of more information about the role of a company director, or need further help and guidance about the formation of your company then feel free to speak to one of our experienced team members.

Your Company Formations provides professional customer support to all clients before, during and after the registration of your company. We can assist you at any point, and our friendly team are here to offer you the support you need via the telephone or email as and when required. We also provide after sales account assistance, so any questions you may have after the company has been incorporated will be answered quickly and efficiency.