The Role of a Director

The role of a director is legally separate and distinct from that of a shareholder or employee. This brings specific responsibilities and duties associated with the company and carries potential personal, legal and financial risks.

The director exercises control and management over the company for the benefit of the shareholders (sometimes referred to as the members). It is important that you understand the commitment you are making as a director. The law imposes a wide range duties and restrictions upon directors, as follows:

A director’s fiduciary position means that the director has a primary duty to act:

• Honestly;
• In good faith;
• In what they consider to be the interests of the company;
• For the benefit of the company as a whole.

The directors owe the following statutory duties to the company;

• To act within their powers
• To promote the success of the company
• To exercise independent judgement
• To exercise reasonable skill, care and diligence
• To avoid conflicts of interest
• Not to accept benefits from third parties

Other examples are:

• Loans or guarantees made by a company to, or in relation to, the liabilities of a director can only be made subject to prior shareholder approval.
  • Unless authorised by the members in advance in a general meeting, directors' service contracts must not exceed 2 years.
  • A payment to a director or person connected to them, such as a family member, by way of compensation (including non-cash benefits) for loss of office is unlawful, unless particulars of the payment are disclosed to members and approved in a general meeting.
  • Certain substantial transactions by the company involving a director or person connected to them, such as a family member, must first be approved by the company in a general meeting, or must be made subject to subsequent shareholder approval.

Companies House publish two guidance booklets explaining the annual and event driven requirements of directors and secretaries in running a limited company:

• Life of a Company - Part 1 Annual Requirements - GP2
• Life of a Company - Part 2 Event Driven Filings - GP3

A private company needs only one director. A director may also act as company secretary, unless they are the only director.

The Role of a Company Secretary

The role of a company secretary typically includes maintaining the statutory registers of the company and ensuring that the company files statutory information within the required timescales set out by Companies House.

Duties of a Company Secretary

The company secretary may also carry out other administrative duties such as providing members’ and directors’ with copies of annual accounts, notice of meetings, circulating written resolutions to members, sending copies of resolutions and agreements to Companies House with the statutory books. The directors of the company are ultimately responsible for ensuring that the statutory responsibilities of the company are met.

As of April 2008 the requirement to have a company secretary for private limited companies became optional.

From October 2009 the new model articles used in standard incorporations of private limited companies make no provision for the appointment of a company secretary. If your company was incorporated after 1st October 2009, and as a director you wish to appoint a company secretary, you should review the company’s Articles of Association before completing the resolution, to ensure the provision is allowed. The company secretary can then be appointed by completion of form AP03 Appointment of Secretary at Companies House.