Limited Company Directors

A limited company is a legally separate business structure from its shareholders. It can own property, enter into contracts, and sue or be sued in its name. Shareholders are not personally responsible for a company’s debts in bankruptcy. Their liability is limited to the value of their shares or the amount of money invested in the company.

Directors of Limited Companies are responsible for managing the company’s day-to-day operations and making strategic decisions about its future direction. They are employees of the organisation and are appointed by the shareholders. Directors have a legal obligation to act in the best interests of the company, ensuring compliance with relevant laws and regulations and operating ethically and sustainably.

Director’s Role in a Limited Company

Directors are responsible for the company’s strategy, making investment decisions, and ensuring the business complies with all relevant laws and regulations. They manage business finances and ensure that the company operates profitably. Directors work closely with the management team to ensure the company achieves its goals. They communicate the results to shareholders and other stakeholders to keep them informed about the company’s performance and plans for the future.

Eligibility of A Director

To become a director of a limited company, an individual must be at least 16 years of age, not be disqualified from acting as a director, and have not been declared bankrupt. Although no specific qualifications are required, an experienced director with the necessary skills and competencies will build trust among investors and stakeholders.

Types of Directors

Executive Directors: Executive directors are directors who are also employees of the company. They are responsible for the company’s day-to-day management and are accountable to the board of directors.

Non-Executive Directors: Non-executive directors are directors who are not company employees. They provide independent oversight and advice to the board of directors and ensure that the company is managed in the best interests of shareholders.

Independent Directors: Independent directors are non-executive directors with no relationship with the company other than their role as a director. They are appointed to provide an unbiased perspective on the company’s operations and ensure that shareholders’ interests are protected.

Duties of a Director

The Companies Act 2006 outlines the specific duties and responsibilities of directors of limited companies. These duties include:

• Act within powers. Directors must act within the powers conferred on them by the company’s articles of association and the Companies Act 2006.
• Promote the success of the company. Directors owe a duty to act in the company’s best interests and make decisions which pave the way to success for the benefit of all its members.
• Exercise independent judgment. Directors must exercise independent judgment when making decisions and not be influenced by their interests or the interests of any third party.
• Exercise reasonable care, skill and diligence. Directors must exercise reasonable care, skill and diligence when making decisions and taking actions on behalf of the company. 
• Avoid conflicts of interest. Directors must avoid conflicts of interest where they have a personal interest in a matter that the company is considering. If a director has a conflict of interest, they must declare it to the other directors and take steps to ensure their interest does not influence the decision-making process.
• Not accept benefits from third parties. Directors must not accept benefits from third parties in return for acting in a way that is not in the company’s best interests.
• Declare interests in proposed transactions or arrangements. Directors must declare their interest in a proposed transaction or arrangement involving the company. This includes any financial, personal, and interest that could be perceived as a conflict of interest.

Directors who fail to meet their duties and responsibilities may be liable to the company, its shareholders, and third parties for any losses caused. They may also be disqualified from being a director in the future. If you are a director and need help with your tax planning or tax return, reach out to our tax advisors for a consultation to determine the most suitable tax planning for your specific needs.