Directors of UK companies have several important responsibilities and duties under the Companies Act 2006 and other relevant laws and regulations. These responsibilities are designed to ensure the proper management of the company and protect the interests of shareholders and stakeholders. Here are some of the key responsibilities of UK company directors:
Fiduciary Duty:
Directors have a duty to act in good faith and in the best interests of the company. They must exercise their powers for a proper purpose and avoid any conflicts of interest that could harm the company.
Duty of Care:
Directors are required to exercise reasonable care, skill, and diligence in the performance of their duties. They should make informed decisions and stay informed about the company’s affairs.
Duty to Promote the Success of the Company:
Directors must act in a way that promotes the success of the company for the benefit of its shareholders as a whole. This includes considering the long-term consequences of their decisions, the interests of employees, and the impact on the community and the environment.
Duty to Avoid Conflicts of Interest:
Directors must avoid situations where their personal interests conflict with their duty to the company. If such conflicts arise, they should disclose them and, in most cases, seek the approval of shareholders.
Duty to Declare Interests:
Directors are required to declare any direct or indirect interests in proposed or existing transactions or arrangements with the company. These interests must be disclosed to the board of directors and recorded in the company’s register of interests.
Duty to Act Within the Company’s Constitution:
Directors must act within the company’s constitution, which includes its articles of association. They should comply with the company’s rules and regulations and exercise their powers in accordance with the law.
Duty to Maintain Proper Accounting Records:
Directors are responsible for ensuring that the company maintains accurate and up-to-date accounting records. This includes preparing annual financial statements that give a true and fair view of the company’s financial position and performance.
Duty to File Annual Accounts and Reports:
Directors are responsible for filing the company’s annual accounts and annual confirmation statement with the Companies House. These documents provide important financial and corporate information to the public.
Health and Safety Compliance:
Directors have a duty to ensure the health and safety of employees and others who may be affected by the company’s activities. They must take steps to minimize risks and comply with health and safety regulations.
Compliance with Tax and Other Legal Obligations:
Directors must ensure that the company complies with tax laws and other legal obligations, including employment laws, environmental regulations, and data protection laws.
Insolvency and Financial Health:
Directors have a duty to monitor the financial health of the company and take appropriate action if the company is at risk of insolvency. They should act in the best interests of creditors if the company is insolvent or likely to become insolvent.
The legal side of Director Responsibilities
Failure to fulfil these responsibilities can lead to legal and financial consequences for directors, including personal liability. Therefore, it is essential for directors to understand and adhere to their duties and obligations under UK law. Directors may also seek legal and financial advice to help them meet their responsibilities effectively.
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What does this mean to me?
Have you failed to submit your company’s annual accounts and confirmation statement (also called the annual return)? As a company director, you are legally required to do so. Don’t think you don’t need to do these, even if you are no longer doing business through your company.
If you don’t submit this paperwork to Companies House, you are breaking the law.
If you don’t want your company anymore you must formally have it struck off the register at Companies House either by dissolving it yourself (if it has no debts) or appointing a Licensed Insolvency Practitioner to put it onto liquidation if it has debts it is unable to pay.
Do not think that if you don’t submit accounts and the confirmation statement the company will simply go away. It won’t. This is particularly the case if the company has debts. All that will happen is that you will be a fraudulent company director and could be pursued for any debt the company owes.
If you haven’t kept your company’s paperwork up to date or are struggling repaying debts the company has, please don’t bury your head in the sand and hope the problem will go away because it won’t. If you ignore the problem it will get worse.
We are here to help, just get in touch for some friendly, confidential advice. We don’t charge for our initial advice so you really have nothing to lose by getting in touch.