So you’ve incorporated the company and ordered your shiny new business cards bearing the grand designation “Director”… but along with the title comes a raft of responsibility. Damian Evans explains your legal – and moral obligations.
“At a basic level, you are legally responsible for ensuring that your company details (such as registered office, shareholders, etc) are up to date on the official register at Companies House and with HM Revenue & Customs, and for filing the company’s annual accounts and annual return on time. You can of course seek professional advice in the preparation of these, but it is your legal responsibility as Director to ensure they are actually signed off and filed as a ‘true and fair’ reflection of the business’ finances.
Note that delivering accounts late will not only incur a late filing penalty but may also damage corporate reputation, as filing dates are displayed on the public record for all to see.
As a Company Director, you also automatically have to file a Self Assessment tax return each year, even if you take no income from the business – and if this is your first time as a Director, you may need to register for self assessment with HMRC. If so, make sure that you do so as soon as possible – the latest you should register is by 5th October after the end of the tax year for which you need to complete a tax return (i.e. for the tax year 12/13, which ended on 5th April 2013, you must register by 5th October 2013).
Company Directorship however is about far more than just administration. Intrinsic to Company Law is the moral remit to endeavour to make the company a success, using your skills, experience and judgment, and to follow the company’s rules, as outlined in its articles of association. Especially in the case of microbusinesses with a sole Director, it can be difficult to view yourself as a separate entity to the company itself, but in the eyes of the law, this is exactly the case, and so you must make decisions for the benefit of the company, and not yourself, and ensure you advise other stakeholders if you might personally benefit from any transaction or activity that the company may undertake (The UK Bribery Act 2010 defines what is acceptable in this regard).
You can of course be banned (‘disqualified’) from being a company director if you fail to meet your legal responsibilities or if an insolvency practitioner or a member of the public reports your conduct as being ‘unfit’. Examples of ‘unfit conduct’ would include:
• allowing a company to continue trading when it can’t pay its debts
• not keeping proper company accounting records
• not sending accounts and returns to Companies House
• not paying tax owed by the company
• using company money or assets for personal benefit
Did You Know? Company letterhead must show either all – or none – of the Directors’ names?