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The Key Responsibilities of a Limited Company Director
If you have taken on the brand new role of a limited company director, you may be wondering what responsibilities are tied to this role. In this post, we break them down so you're fully prepared for the responsibilities you'll have to deal with.
The Companies Act duties
While there are plenty of responsibilities to manage as a company director, there are some key legal guidelines to follow.
The Companies Act 2006 states that company directors must fulfil statutory duties as follows:
Duty to act within powers
This refers to the duty of a company director to act with the company's constitution and only use their power for the purposes they're meant to. You'll need to check exactly what your powers are because the company's constitution might limit them.
Duty to promote the success of the company
Directors must act in the interests of the business before their own interests. That means whenever making crucial decisions you must consider the consequences for stakeholders, employees, suppliers, customers and the communities you operate in.
Duty to exercise independent judgement
Directors must also exercise independent judgement. That means they shouldn't be acting on behalf of a third party's demands or rely entirely on other directors or third parties to make decisions.
Duty to exercise reasonable care, skill and diligence
Directors have a certain responsibility to show skill and care in their role, not just act as a silent partner.
Duty to avoid conflicts of interest
Sometimes a director might have other conflicts of interest. For example, other business dealings. However, it's the responsibility to avoid or manage direct conflicts of interest. It'll be up to other shareholders and non-conflicted board members to decide how to manage or approve the conflict of interest.
Duty not to accept benefits from third parties
Following on from the conflict of interest, a surprising example of this might be when receiving gifts or benefits from third parties as these could be seen as a threat to a director's objectivity.
Duty to declare interest in proposed transaction or arrangement
A director needs to disclose their interests to the board when a transaction is proposed between a director and the company. This ensures there are no conflicts of interest.
What paperwork does a company director need to file?
Besides The Companies Act duties, limited company directors must also ensure the correct paperwork is filed. These include the following list:
Self Assessment tax return
As the director of a limited company, you will need to submit an annual Self Assessment of all your personal income to HMRC to pay tax.
Confirmation Statement
A Confirmation Statement provides details of your company, directors and administrative arrangements. This must be filed once a year.
Form CT600
This is an annual return filed to HMRC with details about your business' income, tax allowances and expenses. This can be used to calculate how much Corporation Tax your company will owe.
Employment Related Securities return
If your company provides shares to employees or directors, you will need to submit details of this through an Employee Related Shares return to HMRC.
If you want to pay yourself a salary via PAYE or have employees, you will need to submit details to HMRC every month.
Statutory Accounts
Limited companies must submit details about the company's finances to the public through a set of statutory accounts to Companies House.
VAT-registered businesses need to submit a VAT return at the end of each quarter. In the VAT return, you must add up all the VAT you've added to sales and then deduct the VAT you've paid on business expenses.
As you can see, being a company director has a lot of responsibilities attached to it. With lots of paperwork and legal expectations, the best advice we can give is to get the help of a qualified accountant or mentor to help guide you through the process.