Have you been made company director? Learn about company director responsibilities and how Company Formations 24.7 can be of assistance.
Under the Companies Act 2006, there are a number of company director responsibilities that need to be observed.
As a director, you are responsible for overseeing the day-to-day running of the company and managing operations. With this come a number of legal and tax obligations, along with responsibilities to shareholders, employees and clientele alike. You do not need any special training or knowledge to become a director, but you must meet the legal requirements:
If you meet these criteria and are made director of a limited company, your next step should be to learn more about your new obligations, and how best to serve your company.
First of all, it is important to remember that you as director have a responsibility to act in the best interest of the company.
This is known as exercising a degree of care, and is important when it comes to ensuring the success of the company. You must register the company for all the relevant taxes (such as VAT and Corporation Tax), and set up a PAYE scheme through HMRC. Having a formation agent take care of this for you can save you considerable time in the beginning, and allows you to focus on other core company director responsibilities.
As director, it is up to you to ensure all the relevant taxes are paid in full by the required deadlines. There are stringent penalties and fines in place for failing to submit full returns on time; in fact, over 1,600 company directors are prosecuted each year, and company directors can be disqualified by HMRC. You can also be fined up to £5,000 per offence.
You are also responsible for filing the company’s annual statements and Corporation Tax Return within nine months of the accounting year-end, and paying all necessary monies.
Directors have to complete an annual self-assessment tax return by January 31st of each year.
This tax return will include all of your salary, along with any dividends you have received. Other income such as bank interest, along with tax relief and expenses, will also be included. This self-assessment must be filed with HMRC and can be done online, and failing to do so by the January deadline will result in a fine of at least £100. Working with an accountant is a great way to stay on top of these and other deadlines, and to make sure your paperwork is in order for easier filing.
As a director is technically deemed a company employee, they will have to pay National Insurance on annual income from salary and bonuses totaling over £8,060. Where contributions are calculated based on the earnings of each pay period with other employees, for directors, contributions are worked out based on their annual earnings. You should pay your NIC as you pay your regular payroll (e.g. monthly, bi-weekly, or weekly).
It may be the case that at some point, you need to borrow funds from the company.
This is known as a director’s loan, and in this scenario, you borrow money that is not a salary payment, dividend payment, or expense repayment. While it is possible to receive a loan from the company, when doing so, you must keep a thorough record of both the amount borrowed and the money paid back into the company, which is known as a ‘director’s loan account’. Director’s loans are also subject to tax.
One of the most important company director responsibilities is acting in the best interests of the company, which can unfortunately mean making the decision to remove a fellow director from a company.
To terminate the appointment of a director, you will need to present just cause, and if you are able to demonstrate that said director is in violation of any provision of the Companies Act 2006, you can remove a director by what’s known as ordinary resolution.
If the director in question is deemed unfit to carry out his or her duties by any of the following bodies, they can be disqualified:
The director can then either go to court to receive official disqualification, go to court to defend the charges, or voluntarily disqualify his or herself to avoid going to court. Once disqualification has taken place, you will need to notify Companies House about the removal of the director, and they will add their details to a register and update the documents pertaining to your company.
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