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Your Responsibilities as a Company Director

Becoming a company director is a responsibility.

Do you know what you are legally required to do?

As a director, you’re legally responsible for running the company and making sure information is sent to HMRC on time.

This includes:

You can hire other people to manage some of these things day-to-day (for example, an awesome accountant) but you’re still legally responsible for your company’s records, accounts and performance.

General duties

As a director, you must perform a set of 7 duties under the Companies Act 2006, these are as follows:

  • Company’s constitution

You must follow the company’s constitution and its articles of association. These are written rules about running the company, agreed by the members, directors and the company secretary.

The constitution sets out what powers you’re granted as a director, and the purpose of those powers.

  • Promote the success of the company

You must act in the company’s best interests to promote its success. You must consider the:

  • consequences of decisions, including the long term

  • interests of its employees

  • need to support business relationships with suppliers, customers and others

  • impact of its operations on the community and environment

  • company’s reputation for high standards of business conduct

  • need to act fairly to all members of the company

If the company becomes insolvent, your responsibilities as director will apply towards the creditors, instead of the company. A creditor is anyone owed money by the company.

  • Independent judgement

You must not allow other people to control your powers as a director. You can accept advice, but you must use your own independent judgement to make final decisions.

  • Exercise reasonable care, skill and diligence

You must perform to the best of your ability. The more qualified or experienced you are, the greater the standard expected of you.

You must use any relevant knowledge, skill or experience you have (for example, if you’re a qualified accountant).

  • Avoid conflicts of interest

You must avoid situations where your loyalties might be divided. You should consider the positions and interests of your family, to avoid possible conflicts.

You should tell other directors and members about any possible conflict of interest, and follow any process set out in the company’s articles of association.

This duty continues to apply if you’re no longer a director. You must not take advantage of any property, information or opportunity you became aware of as a director.

  • Third party benefits

You must not accept benefits from a third party that are offered to you because you’re a director. This could cause a conflict of interest.

The company may allow you to accept benefits like reasonable corporate hospitality, if it’s clear there’s no conflict of interest.

  • Interests in a transaction

You must tell the other directors and members if you might personally benefit from a transaction the company makes. For example, if the company plans to enter a contract with a business owned by a member of your family.

  • Other duties

There are other duties you must perform as a company director. For example, you must:

  • not misuse the company’s property

  • apply confidentiality about the company’s affairs

Information & Credits from

Finlay Everington