In a previous article, we briefly touched upon the topic of limited company directors’ responsibilities.
We thought it would be a good time to go back to this and discuss limited company directors’ responsibilities and duties in further detail.
As we have previously mentioned, there are various ways you can operate as a contractor. It is common for contractors to choose to operate via their own limited company. When you incorporate your company with Companies House you must name somebody as a director, and this is often you.
What is the role of a limited company director?
Looking at it in its simplest form, the director is responsible for the day to day running of the company, and making sure that it is run in accordance with UK Company Law.
Who can be a limited company director?
Generally speaking, anybody can be a limited company director, but there are some exceptions:
- Company directors’ must be aged 16 or over. There is currently no maximum age limit.
- If you are an undischarged bankrupt or have been disqualified from being a director of another company, you are not allowed to be named as a director of a new company.
- At least one director must be ‘natural’ i.e. a human being not another company.
Responsibilities of a limited company director
As a director of a limited company you are obliged to act honestly and lawfully and make decisions for the benefit of the company and its shareholders. Specific responsibilities are outlined on the .Gov website and these are listed below:
- try to make the company a success, using your skills, experience and judgment
- follow the company’s rules, shown in its articles of association
- make decisions for the benefit of the company, not yourself
- tell other shareholders if you might personally benefit from a transaction the company makes
- keep company records and report changes to Companies House and HM Revenue and Customs (HMRC)
- make sure the company’s accounts are a ‘true and fair view’ of the business’ finances
- file your accounts with Companies House and your Company Tax Return with HMRC
- pay Corporation Tax
- register for Self Assessment and send a personal Self Assessment tax return every year – unless it’s a non-profit organisation (eg a charity) and you didn’t get any pay or benefits, like a company car
It is important to note that the company records must be kept at the companies registered office, if they are not, you must inform Companies House of their whereabouts.
Information that must be kept as part of the company records, include:
- details of the directors, shareholders and company secretary (if applicable)
- share purchase transactions
- details of any loans or mortgages that have been made against the company assets
- the results of shareholder votes and resolutions
You must keep your records for a period of at least 6 years from the end of the last company financial year. You may be required to keep them longer, if:
- they show a transaction that covers more than one of the company’s accounting periods
- the company has bought something that it expects to last more than 6 years, like equipment or machinery
- you sent your Company Tax Return late
- HMRC has started a compliance check into your Company Tax Return
Marketing your limited company
Most contractors work on site, but if you do have an office you are legally required to a display a sign with the company’s name, at all times. If you produce any promotional materials such as brochures, newsletters, pens etc. These must have on them the company name (including the words Limited or Ltd), registered number and registered address, as well as where the company was registered i.e. England, Scotland or Wales.
Taking the ‘w’ out of work
Reading through this list, it may seem that this is a lot of work. However, you don’t have to manage this on your own. Hiring the services of a specialist contractor accountant, can save you a lot of time and in the long run, money as well. A contractor accountant will: tell you what forms need filling and when they need submitting by, and keep you updated on the ever changing tax rules.
Further details are available in our Directors’ Responsibilities guide, download it here. Our team at Cogent Accountants we have been supporting contractors and freelancers for over 20 years. If you are looking for expert and uncomplicated advice, give us a call today on 020 8952 2234.