What Does Being a UK Company Director Mean?

07 October 2011

Quite a few of you reading this blog post may already be company directors, some of you may be thinking about setting up a UK company and becoming a director, whilst there may be some of you out there that have been asked by a company if you would like to take a directorship role, either free of charge or with some form of annual compensation.

The title “Company Director” sounds impressive, and it is always nice to be able to tell your friends, family, and colleagues that you are a director of a company! But wait, before you take up the offer to become a director (and any compensation associated with it), or set up a company and become one, you should know what responsibilities come with the role.

Are there are any potential repercussions if I do something wrong? What responsibilities do I have on an ongoing or annual basis? Do I meet the requirements?

What are the eligibility requirements to become a company director?
  • You must be over the age of 16
  • You must not have been disqualified from acting as a company director
  • You can not currently be in bankruptcy (unless a court has given you permission to act for a particular company)
  • You must not be subject to any UK government restrictions
  • You must not have been restrained by a court from becoming a company director

Sounds easy enough? Well it is! And if you do not fall in to any of the above categories, you are pretty much free to become a UK Company Director, but note, it is up to the owners (shareholders) of a limited company to appoint the directors who will run the company on their behalf.

Also, when you become an official company director this becomes public knowledge, and anyone can perform a directors search on the internet to see which companies you are a director of. Most websites charge for this information, but some provide a company directors search free 😉

What are the responsibilities and risks?
  • You are personally responsible for making sure information requested by Companies House is received by the Registrar. (annual accounts & returns)
  • You are answerable to the owners (shareholders) of the limited company
  • Your statutory duties are now specified in law as per the Companies House Act of 2006
  • You are responsible for the health and safety of your employees
  • You can be responsible for entering in to credit arrangements on behalf of the company
  • You can be prosecuted since it is a criminal offence if company accounts and returns are not filed (approx 1,000 directors are prosecuted annually!)

The Companies Act states that the role of directors is to act in a way which they consider most likely to promote the success of the company for the benefit of its shareholders as a whole and that, in doing so, they will need to have regard where appropriate to long term factors, the interests of other stakeholders and the community, and the company’s reputation. There is particular focus on the area of conflicts of interest.

Specific Statutory Company Directors responsibilities per the Companies House Act 2006

  • Be diligent, careful and well informed about the company’s affairs. If you have any special skills or experience, use them
  • Be honest, and remember that the company’s property belongs to it and not to you or to its shareholders
  • Act in the company’s best interests, taking everything you think relevant into account
  • Obey the company’s constitution and decisions taken under it
  • Avoid situations where your interests conflict with those of the company. When in doubt disclose potential conflicts quickly
  • Remember that you remain responsible for the work you give to others
  • Seek external advice where necessary, particularly if the company is in financial difficulty
  • Make sure the company keeps records of your decisions

OK, now you know what it takes to become a company director, are you up for the task? Are you already a company director, but were not aware of all the responsibilities bestowed upon you?

We’d love to hear your thoughts on this in the comments section.