There are many responsibilities for directors to follow when they run their own company. From ensuring the wellbeing of their staff to always working in the best interest of the company. Some of these responsibilities fall directly under the law of Companies Act 2006. While most directors run their company well and honestly, there are some who, whether deliberately or not, don’t adhere to their responsibilities.
Director responsibilities – Under Companies Act 2006 law
- Keeping company records up to date and reporting 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.
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 in 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. If during an insolvency procedure a director has been found guilty of breaches such as wrongful trading or trading whilst insolvent, they could face disqualification as a director for up to 15 years, or the possibility of unlimited liability and being personally responsible for company debt.
In some cases, a director could even face criminal charges. If guilty of fraudulently trading, a director could face criminal convictions.
A director should always take their responsibilities very seriously, those enforced by law and those expected. A director’s responsibilities are designed to protect the company and ensure the best possible financial outcome. The possible consequences of breaching these responsibilities could result in potential liquidation, seeing a director become personally liable financially, or in the most extreme cases a criminal conviction.
How we can help
If you’re unsure about what responsibilities you have as a company director or are concerned you may have accidentally committed some offences, it’s important to know where you stand. Breaches can lead to insolvency and company closure, all of which will involve an investigation into the company director. If you are seeking advice, we can let you know where you stand and what you need to do for the best possible outcome.