Shareholders own a company; directors are responsible for running it. That role brings duties to the company and responsibilities for records, filings and the way the business operates.
Delegating bookkeeping or company administration does not remove the directors’ responsibility to oversee the work.
Know the company’s rules
Read the articles of association and understand how decisions must be made. Check the requirements for appointments and changes in directors’ details, and ensure the appropriate information reaches Companies House.
The GOV.UK guide to running a limited company provides a starting point for current responsibilities.
Apply the main duties
Directors need to:
- Act within their powers and use them for proper purposes.
- Promote the company’s success for the benefit of its members as a whole.
- Exercise independent judgement.
- Use reasonable care, skill and diligence.
- Avoid conflicts of interest.
- Observe the rules on benefits from third parties.
- Declare interests in proposed company transactions or arrangements.
Promoting success involves considering more than the immediate result. Longer-term consequences, employees, business relationships, the community, the environment and fair treatment of members all matter.
Potential conflicts and transactions involving directors need proper consideration and any required approvals.
Keep administration under control
Arrange reliable accounting records and review the accounts before approving them. Monitor filing deadlines, confirmation statements, tax returns and changes in registered information.
The company’s wider responsibilities include employment, health and safety and tax compliance. Agree who handles each area and how the board will know whether the work has been completed.
Record important decisions, including concerns raised by individual directors.
Act on financial difficulties
Financial trouble changes the decisions directors need to consider, including the interests of creditors. Get advice promptly if the company may be unable to meet its obligations.
Continuing to incur debts without properly considering the position can create personal exposure. Losses alone do not answer the question: the full circumstances need assessment.
Serious failures can lead to penalties, disqualification or personal liability. Someone who continues directing the company’s affairs without a formal appointment may also have responsibilities; resigning on paper is not necessarily the end of the matter.