There are many responsibilities for directors to follow when they run their own company from ensuring the wellbeing of their staff to adhering to laws relating to such as health and safety. While most directors run their company well and honestly, there are some who, whether deliberately or not, don’t adhere to their responsibilities.
One such example of a director deliberately not complying with his responsibilities is in the recent case of Jonathan Rivers, director of Derby based company Wyvern Media. He was jailed for fraudulently trading by defrauding customers with the cold-call scam he was running; he has also been ordered to repay £1.2m to victims of the scam and has been banned from being a director for 10 years.
So what are the responsibilities of a director? Based on information in the Companies Act 2006, these are just some of a director’s responsibilities:
- Keeping company records up to date and report any changes
- Filing accounts and the company’s tax return as well as paying Corporation Tax
- Following the rules of the company as set out in its articles of association
- Register for self-assessment and send in a personal self-assessment tax return every year
- Removing all conflicts of interest where possible and informing the other shareholders if you may personally benefit from a transaction the company is set to make.
- Acting in the interests of the creditors particularly when insolvency is a potential threat
- Maintaining confidentiality with regard to the company’s affairs.
For more information regarding a director’s responsibilities, visit the ICAEW website.
Why do directors have these responsibilities placed upon them?
These responsibilities are placed on directors in order to protect the company, staff, suppliers and any other creditors related to the company. The responsibilities relate only to the company which they are directors and not any company which they only have an interest or investment in.
What happens if a director breaches his responsibilities?
If a director is found to have breached his responsibilities, the company can take enforcement action against the director via a board decision or by the shareholder(s) in certain circumstances. If the company is an insolvent position when the breach is discovered, enforcement action could be started by a liquidator.
When a breach is found, there are a number of penalties which can be issued including an injunction, damages or compensation. For more serious breaches or when a breach has been discovered as part of an insolvency process, it is likely to be deemed as a criminal offence and therefore a fine, jail sentence or director ban can be issued.
If you think you have breached your director responsibilities, especially with regards to insolvency or fraudulent/wrongful trading, get in touch with us on 0800 901 2475. We can provide you with the correct advice on how to act in these kinds of situations.