You have made the leap to set up your limited company! How exciting! The day you receive your incorporation certificate is a pivotal moment!
But what do you have to do now? What are you responsible for, and when?
This isn’t something to be taken lightly, as you have legal responsibilities now as a director. Your company and your responsibilities are covered by the Companies Act 2006, but let’s make sense of it.
this is a hefty read, if you’d rather something more short and sweet, Companies House have put together this video explaining your responsibilities:
Sending information to Companies House on time
You may have appointed an accountant to manage our accounts and filing them with Companies House, but the responsibility still rests on your shoulders.
It is not a reasonable excuse to say that you relied on someone else, if your accounts are filed late.
Information to send to Companies House includes:
- the annual confirmation statement
- annual accounts (even if you’re dormant)
- any changes to directors or their details
- changes to your registered office
- changes in shareholdings
- registration of charges (mortgage charges against the company)
- change in your “people with significant control” (PSCs)
Seven legal duties
As well as making sure information is sent to Companies House and HMRC on time, there are seven duties of a director, covered by the Companies Act:
1 Follow the company’s constitution
You must follow the company’s articles of association and constitution.
These are the legal documents created when your company is set up.
It includes rules around how the company is run, and what should be agreed between members, directors and the company secretary, if you need one.
2 Promote the success of the company
You must always act in the best interests of the company above all else. this includes:
- the consequences of your decisions on the future of the company
- the interests of its employees
- managing good relationships with suppliers, customers and others
- the impact of the company’s operations on it’s community and environment
- maintaining the company’s reputation for high standards of business conduct
- act fairly to all members of the company
If the company becomes insolvent, then your responsibilities as director swap to the creditors, not the company
3 Maintain independent judgement
- You must not allow others to control your powers or decisions as director.
- You can of course accept advice, but you must use your own independent judgement.
4 Exercise reasonable care, skill and diligence
- You must perform to the best of your ability.
- Use your qualifications or experience to provide a high standard.
5 Avoid conflicts of interest
- You should avoid situations where your loyalties are divided, for instance between the business and family interests.
- Make sure other directors and members are aware of any possible conflict of interest, and follow your articles of association for guidance and process.
- This applies even if you stop being a director. You should still not take advantage of opportunities you became aware of when you were a director.
6 Third party benefits
- Benefits offered by third parties because you’re a director should not be accepted.
- These benefits may create a conflict of interest.
- This could be an expensive gift in return for agreeing to a contract.
- You may be allowed to accept small benefits like corporate hospitality though, as long as there’s no conflict.
- It is good practice to have a log of all benefits offered, to whom, and from whom, and whether these were accepted.
7 Interests in a transaction
- If you’re likely to benefit personally from a transaction, you must tell the other directors or members.
- As above, it is good practice to have a log of all transactions with potential benefits.
- Consider the company entering into a contract with a close family member, and who is likely to benefit.
Phew – we told you it was a hefty read!
You do need to know this stuff. We can guide you on your journey, but remember that it is still your ultimate responsibility to get this right.
Please get in touch if you’d like our support with your limited company.
And do check out our other limited company resources.