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.

5) Avoid Conflicts of Interest

You must always avoid conflicts of interest. If there’s potential for a conflict of interest, you must immediately inform any other directors and members and subsequently follow the processes outlined in the articles of association. Even if you’re no longer a director, you must not take advantage of property or information that you obtained while you were an acting director of the company.

6) Do Not Accept Third-Party Benefits

Unless it is undeniably clear and reasonable, you must not accept benefits, and certain gifts, from third parties, as this may also cause a conflict of interest.

7) Inform Other Directors of Transactions

Directors have a statutory duty to disclose any direct or indirect interest in proposed or existing transactions or arrangements with the company, for example, if the company plans to entertain an arrangement or contract with a business owned by one of your family members.

Read More ‘How to Resign as a Director of a Company: Your Essential Guide

Records and Responsibilities

To prove that you’ve fulfilled your legal duties as a company director, you need to record the minutes of board meetings. By law, these minutes must be retained for a decade.
Don’t forget, your duties as a company director are not just limited to your role as a company spearhead — you are also held responsible to maintain accurate records with Companies House.

Are you looking to change a company director or update the details of PSCs or a Secretary? Mint Formations has over 20 years of experience establishing businesses and liaising with HMRC and Companies House on their behalf. Contact Mint Formations today to find out more!

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Raj co-founded Mint Formations with business partner Andy Tree in 2017. Mint formations is established to nurture small UK businesses and enable exciting new opportunities for quick growth. As a successful entrepreneur, Raj knows how to start and run a business. He currently resides as a board member of seven successful companies across the world. He is best known for founding Integra Global Solutions, specialists in robotics, automation, and business process optimisation.

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