There are no formal qualifications required to become a company director.
A director must be at least 16 years old, must not be an undischarged bankrupt and cannot be disqualified from being a director by a court.
What is a director of a limited company?
There is a clear distinction between a company director, who is employed by the company, and a shareholder, who actually owns part of the company based on the amount of shares they hold. Many directors are also shareholders and, in a personal service company, they are usually the sole director and shareholder.
A limited company is a legal entity with its own constitution and articles of association. These are written rules about running a company. They specify the powers you’re granted as a director and the purpose of those powers. As a director, you must always act in the best interests of the company. Companies House describes this as ‘promoting the success of the company’.
What are a director’s statutory duties?
The statutory duties and responsibilities of a company director are set out in the Companies Act 2006, the company’s articles of association and any service contract that is put in place between a director and the company. The Companies Act 2006 provides the statutory regime for directors’ duties, which consists of seven requirements which means a director of a company must:
What are the day to day management duties of a director?
The day-to-day management of a company is delegated to the directors by its shareholders. The company may employ people to help carry out these tasks, such as a company secretary, accountant or tax specialist. The following list is not exhaustive but your responsibilities include duties such as:
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Consequences of breach of directors’ responsibilities
Directors are subject to a variety of sanctions for breach of their duties. The limited liability afforded to a limited company applies only to its shareholders and not its directors. Directors may be personally liable where they fail to meet their statutory responsibilities under company law or provide misleading financial reports and accounts.
Breach of company law may be a criminal offence. For instance, breach of the Companies Act 2006 requirements on corporate administration (e.g. keeping company records and making statutory filings) may constitute an offence for which the company and every director in default may be liable. Generally, you need to keep company records for at least six years, after the end of the company’s year end.
Directors and other officers may also be liable to fines under other legislation to which the company is subject, for instance, employment law or data protection laws.
Where breaches are serious, a court may disqualify a person from being a director of a company or in any way concerned with its management. The possible grounds for disqualification are wide, including persistent breach of company law (e.g. to make statutory filings), fraudulent trading or, where the company has become insolvent, that the director is unfit to be concerned in the management of a company.
So, as you can see being a limited company director comes with a lot of
responsibilities. However there also many advantages running your business as a limited company.
Get in touch with our expert staff so we can help.