Company Directors UK Law
A company director is ultimately responsible for the success or failure of the company they lead. In their leadership role, company directors influence the direction of the business and how it impacts a range of stakeholders, from employees and suppliers to customers and the environment. The duties of a company director are typically outlined in a company's constitution. These duties may include selecting and supporting the company's chief executive. Directors may also be tasked with approving annual budgets, reporting to stakeholders such as company shareholders, setting salaries for the company's management team, and establishing broad policies and objectives for the company. In addition to roles outlined in company rules or constitution, company directors are also guided by and bound to responsibilities laid out in law.
Legal Eligibility Requirements
A company director may be a person or a corporate entity that is appointed by company members. For example, a company director may be elected by shareholders at an annual meeting. Their role is to run the company on the behalf of company members, such as shareholders. The day-to-day operations and management of the company is typically delegated to executive officers, such as the Chief Executive Officer.
According to the Companies Act, at least one director must be a natural person (that is, not a corporate entity). Directors must be at least 16 years of age, although there is no maximum age to serve in the position. In order to be eligible to serve as a company director, an individual must not be the subject of bankruptcy proceedings and must registered as a disqualified company director by the court, unless an exemption is provided by the court.
Legal Responsibilities of a Company Director
The roles and responsibilities of a company director are outlined in common law as well as legislation, such as The Companies Act, 2006. Generally, a company director is legally responsible for filing a company's annual accounts and annual return on time. They are also required to ensure company details are kept up to date and reported accordingly to Companies House. A company director must also fulfil a range of duties that have been a part of common law for centuries and for the most part codified in recent revisions to the Companies Act.
The responsibilities of company directors are primarily outlined in sections 171 to 177 of the Companies Act, which is the primary source of company law in the United Kingdom. These roles are not exhaustive and additional responsibilities may be outlined in company law and in the equitable duties of directors, as well as within the constitutions of individual companies. A main element of directors' responsibilities is the requirement to uphold corporate social responsibility, where corporate benefit or profit is not the sole objective of their efforts.
According to the Companies Act, one of the main responsibilities of a director is to abide by the powers given to them through the company's constitution (for example, the company's memorandum and articles of association). Directors are ultimately responsible to company members or shareholders and they must also abide by decisions made by members and shareholders. Directors must promote the success and reputation of the company, including considering the broader impacts of their decisions. They must, for example, make decisions that consider the interests of employees and impacts on the environment, customers, suppliers and others. Company directors must also exercise independent judgement and apply reasonable care using their skills and experience. They are also required to avoid conflicts of interest and report any interest in a proposed business transaction involving the company. Company directors must also not accept benefits from a third party.
Registering as a Company Director
By law, a company director must be registered with Companies House. Companies House is a government agency with the authority to register companies in the United Kingdom and report relevant related information to the public. Companies House is also responsible for collecting financial information from UK companies. It also maintains a registry of disqualified directors who are not eligible to serve as a company director by court order or voluntary disqualification.
At the time a new company is registered, the names of company officers including one or more company director must also be provided to Companies House. When registering as a company director, the full name must of each director be submitted. In addition, their residential and service address, nationality, occupation, data of birth, and other details must be submitted. If a new director is appointed or a former director has been terminated, all changes must also be provided to Companies House.