Limited companies cannot run without at least one director, which comes with a set of responsibilities. It is important to know if you are eligible to become a company director and what the responsibilities are:
Being a Company Director
For being a company director of a limited company you must qualify based on the following criteria:
- You must be at least 16 years old,
- Have a UK registered address,
- You must not have an ongoing bankruptcy.
- You must not be a disqualified director. Examples of disqualified directors are but are not limited to wrongful trading, fraudulent trading, or unfit conduct (failing to adhere to duties as a director).
It is worth keeping in mind before being a company director, that your name and personal information, such as the business registered address and an overview of the company accounts, will be publicly displayed on the Companies House website.
6 Duties of a Company Director
Once you’ve become a director there are certain responsibilities that you must fulfill:
- Memorandum and articles of association
This needs to be prepared when initially setting up the company. The Memorandum of association is a legal statement that needs to be signed by all shareholders or guarantors of the company, of that time, agreeing to the company's formation. This sets out the basis for forming a company.
The article of association is a set of rules written out around the day-to-day running of the company, agreed by the shareholders, guarantors, directors, and the company secretary.
- Filing of annual accounts
These will include preparing and filing the year-end company accounts to Companies House and filing the corporation tax return to HMRC. Please bear in mind that even if your company has zero transactions you will still need to file dormant accounts to Companies House and make HMRC aware or they will assume your company is trading and may raise a penalty for non-filing of the tax return.
- Paying the corporation tax to HMRC
This can be done in one go or by a monthly payment plan, HMRC will send a letter or email with the amount and ways to pay once the corporation tax return (CT600) has been filed.
- Filing a Confirmation Statement to Companies House every year
This is also a legal requirement as Companies House requires an update every year of any non-financial changes within the company. These can include the company's registered address or directors’ details. This helps in ensuring that accurate and current information relating to the company is available publicly on the Companies House website.
- Updating your shareholder
If you have any shareholders and you personally will benefit from a transaction the company makes, you are expected to update them on a regular basis.
- Keeping company records
Please do not discard those annual accounts, invoices, and receipts once you’ve filed, for at least 6 years from the end of the last company financial year they relate to, as there is a potential to be audited by HMRC. You want your tax returns to be consistent and have all the information available if required. There are many options on how you can store these for example accounting software like QuickBooks or Xero, you can also keep them digitally on your computer but you might want to keep a backup on a memory stick or hard drive just to be safe, and you can also go old school and keep paper copies but this could end up taking up a lot of room and it’s not very efficient when looking for a document.
Should I Become a director?
If you are serious about setting up a limited company and feel you can really manage the responsibilities of being a director, then it might be the right choice for you. Considering the variety and complications of the filing responsibilities, most companies would hire other people to oversee some of your day-to-day responsibilities, as an accountant, but you as the director will still be legally responsible for your limited company.