The responsibilities of a Private Limited Company director
The Companies Acts 1985 and 1989 lay down legal duties and responsibilities governing the conduct and
responsibilities of directors of Private Limited Companies. Failure to comply can result in a fine or in cases of serious
breaches, imprisonment or disqualification from holding the position of company director. When setting up a Private
Limited Company there must be a minimum of one director and a separate company secretary. Where there is more
than one director one of the directors can take on the role of secretary. A director should always act honestly and
with the company’s best interest in mind.
The Companies Act imposes many duties on a company and specifies about 150 offences. Because a company can
act only through its officers, it is its officers who are held liable for any default. The directors, being officers of the
company, may be criminally liable for any default committed by the company.
Offences for which a director may be held criminally liable include failure to file on time:
the company’s annual return;
details of changes in the company’s directors or secretary; and
other documents required under the Companies Act.
Directors must bear in mind that while they can delegate duties they cannot delegate responsibility - in the event that
something goes wrong the “buck stops here”. For example if an accountant is appointed to complete annual returns
and fails to do so, the directors and the company secretary, not the accountant, are responsible.
Anyone in breach of their statutory duties may be fined up to £5,000 and could also end up with a criminal record.
The duties of company directors fall into three main areas as follows:
Setting up and registering the company.
Day to day operations.
Closure or winding up.
Setting up and registering the company
During the registration process for a new company the newly appointed company director is responsible for choosing
an appropriate name for the new company and checking with the Companies House Register that the name is
acceptable. There are a number of issues to be aware of, for example, the rules relating to categories of name that
are unacceptable, such as a name already in use by another company. For more detailed information on this, visit
the Companies House website. You can obtain a start up pack from Companies House which will explain the
registration process in detail and provide the forms needed to complete the registration.
Day to day operations
This involves a number of legal duties which fall under the following headings:
All businesses must keep records. For a Private Limited Company, the types of records that must be maintained
Details of shareholders, debenture holders, directors and company secretary;
Details of any changes to directors or company secretary;
Minutes of shareholders’ meetings;
Accounting records and filed accounts, including a signed directors’ report, signed balance sheet, profit
and loss account (even if the company is not trading or making a profit), auditors’ report (signed by the auditor)
unless the company is exempt and notes to the accounts. Company directors can face criminal charges if they
hide information from auditors and have to sign a statement confirming that they have not done so; and
Financial information needed to complete tax and NI returns. Note: financial information must be retained
for six years.
This is a specific duty which involves making information available to anyone who has a right to view it. Members of
the company have the right to access minutes of meetings and members of the public have the right to access
certain information such as company accounts submitted to Companies House; see Companies House website for
more information regarding right of access. This duty also extends to disclosing relevant company details, for
example ensuring that company stationery includes the address of the registered office, the company name, the
registration number and all or none of the directors’ names.
Submitting returns to Companies House and other bodies
When changes are made to the details held in the statutory registers, notification of the changes should be made to
Companies House on the appropriate form when required. There are many other forms which have to be sent to
Companies House as well as other items that are required by law. The returns and documents that have to be sent to
Companies House include:
details of changes of shareholders;
details of directors and their interests;
details of a change of company secretary;
details of any charges;
details of changes of the registered office;
notification of a change in the accounting reference date;
details of share allotments;
copies of special or extraordinary resolutions;
the annual return; and
copies of the annual accounts, including the directors’ report.
Any information submitted to Companies House that is found to be illegible or not in the correct format will be
rejected. The rejected information will be returned to the company with an explanation of why it is unacceptable. The
director/s/secretary then have 14 days in which to rectify the problem and return the corrected document or form.
All submissions to Companies House must be sent in by the due date. For example, company accounts are
allocated an accounting reference date. Accounts must be prepared up to this date and then submitted within a
maximum of 10 months after the accounting date. Failure to meet the deadline will result in a late filing penalty and
may also result in a criminal prosecution of the director/s and company secretary.
There are a number of other duties which include:
Arranging the Annual General Meeting (AGM). Members, shareholders and auditors must be notified 21
days in advance of the meeting and provided with a copy of the annual report and accounts. Note: Private
Limited Companies can avoid formal meetings if shareholders elect to dispense with AGMs. However even in
this situation they are still required to circulate accounts to all shareholders.
Ensuring that minutes are kept of all meetings.
Ensuring that the person appointed as company secretary has the appropriate knowledge and experience
to fulfil their role.
Health and safety
The Health and Safety at Work Act lays down a number of responsibilities for businesses. The overall theme
however is that an employer has a duty of care to employees to provide a safe, healthy work environment. This duty
extends to the general public and indeed anyone who can be injured or suffer harm or loss as a result of the activities
of the company. The directors of the company and often the company secretary will, in the majority of cases, be held
personally and jointly responsible for any failure to comply with health and safety legislation.
Under the Enterprise Act, a director may face disqualification, fines and a prison sentence of up to five years, if they
are found guilty of a breach of competition law and their conduct makes them unfit to be involved in the management
of a company. These breaches could include: price fixing; limitation of production; market sharing; and bid rigging.
Additional regulations and responsibilities
A director is the person in charge of a company and in this capacity is deemed to have the final say in matters of
company policy and operation. Depending on the type of business you operate you will be covered by a series of
specific regulations relating to your sector and/or your activities. For example, any business selling goods or services
will have to trade within consumer legislation. In addition to specific legislation covering certain types of business,
there are also a number of other business wide regulations to be aware of, such as environmental legislation
covering the safe disposal of waste materials and employment legislation. If you are unsure about which specific
legislation your business must comply with then seek professional advice. Failure to comply can have repercussions
for both the company and its director/s. This is particularly the case if a director acts negligently or deliberately
flaunts the rules.
Closure or winding up
When a company is winding up or has become insolvent the directors have a legal duty to inform Companies House,
using the correct documentation. The company registrar will then remove the company from the register. Where the
company is insolvent the Insolvency Act will apply. If a company secretary or director continues trading when they
are aware that the company is insolvent, they may be personally financially liable. They may also be liable to a
criminal prosecution and will usually be disqualified from being a company director for up to 15 years.