What Is a Company Director?
The role of a company director is one of the most important and influential positions in your business. Here, we examine the responsibilities that come with being a company director and answer the crucial question, “what is a company director?”
If you’re currently appointing a new director, it’s important you select the most suitable candidate for the role, as the responsibilities this individual undertakes can be vital to your company’s short and long-term success.>
The Definition of a Company Director
Exactly what is a company director? Look in a dictionary or do a quick Google search and you might get any number of different definitions, as each role and its associated responsibilities will be defined by each company and its needs. However, there are obligations that all directors will need to perform. The online Business Dictionary, for example, defines a company director as:
“An appointed or elected member of the board of directors of a company who, with other directors, has the responsibility for determining and implementing the company’s policy. A company director does not have to be a stockholder (shareholder) or an employee of the firm, and may only hold the office of director Directors act on the basis of resolutions made at directors’ meetings, and derive their powers from the corporate legislation and from the company’s articles of association.”
Notably, the dictionary highlights that a company director is a powerful decision-maker with a high level of responsibility: “as the company’s agents, they can bind the company with valid contracts entered into with third-parties such as buyers, lenders, and suppliers.”
Corresponding with Companies House
Since a company director is legally responsible for running a company, all relevant information must be sent to Companies House on time. This includes:
- Confirmation statements
- Annual accounts
- Any change in your company’s officers or their personal details
- A change to your company’s registered office
- Allotment of shares
- Registration of charges (mortgage)
- Any change in your company’s People with Significant Control (PSC) details
Although you can hire other people to handle some of the above (such as an accountant), the legal responsibility of the company’s records, accounts and performance ultimately lie with the company director.
Legal Duties of a Company Director
In addition to the expected responsibilities of a company director, there are seven statutory duties a director must perform:
1) Follow the Company’s Constitution
A company director must follow the company’s constitution and adhere to its Articles of Association.
It’s important to be familiar with these articles of association, as they will outline your decision-making powers. If you encroach on these powers, some decisions may be overturned and you might even have to compensate the company for any subsequent financial losses
As a company director, you need to act in the company’s best interests and promote its success. According to GOV.UK, you should consider the following:
- Consequences of decisions, including in the long term
- Interests of the company’s employees
- Business relationships with suppliers, customers and others
- The impact of a company’s operations on the community and environment
- The company’s reputation for upholding high standards of business conduct
- The need to act fairly to all members of the company
In the case of insolvency, your director responsibilities will apply to the creditors — not the company.
3) Form Independent Judgment
The powers of a company director must not be controlled by a third party. Company directors must use their judgment to make final decisions.
4) Exercise Reasonable Care, Skills and Diligence
As a company director, it’s important that you perform to the best of your experience and ability. You must use all relevant skills and knowledge to solve any issues that may arise. Therefore, directors with specific professional training (such as an accountant or lawyer) are held to a higher standard in related issues than less-qualified colleagues.