Frequently Asked Questions
Directors and Secretaries
- What is the minimum number of directors that a limited company can have?
- A private limited company must have a minimum of one individual (human) director aged 16 years old or over at any point in time. This is so the company can be traced back to an individual person who can be held responsible for any wrong doings of the company.
- Can I be a director of a UK limited company if I am not a UK resident?
- Yes, a non-UK resident can be a director of a UK limited company. However the director must ensure that the registered office address of the company is located within the UK. If they do not have an address available for use in the UK there are professional registered office services available. Wisteria Formations can offer this service on a yearly basis for only £100 plus VAT.
- Can another company be director of the limited company?
- Yes, another company can be a director of a private limited company. However since the October 2008 implementation of the Companies Act 2006, it is now also necessary for the company to have at least one human director.
- Are there restrictions on who can become a director?
- Generally anyone can become a director of a private limited company. There are a few restrictions though such as people who have been disqualified from acting as a company director in the past. Individuals must not be an undischarged bankrupt and they must be at least 16 years old. Another company, individual or partnership can be a director as long as there remains at least one human director.
- What are the duties of a director?
A director of a private limited company has a wide range of important duties, therefore it is important that any newly appointed director is aware of them. These include:
- General Duties - acting within their authority, acting in a way which promotes the interests of the company and exercising reasonable care, skill and diligence.
- Constitutional and Contractual Duties - Directors have a duty to act in accordance with any constitutional or contractual agreements, i.e. the Memorandum of Associations, Articles of Association, Shareholder Agreements, Employment Agreements, Service Agreements, Staff Handbooks, Board Resolutions etc.
- Duty to exercise independent judgement - A director must first exercise judgment independently.
- Duty to avoid conflicts of interest - Directors have a duty to avoid conflicts of interest, or where one may arise to disclose this to non-conflicted directors and allow them to make the decision regarding the relevant transaction.
- Duty not to accept benefits from third parties - Directors must not accept benefits from third parties for being a director, however they will not be in breach of this duty if the acceptance of such benefit cannot reasonably be regarded as likely to give rise to a conflict of interest.
- Fiduciary Duties - Directors have a duty in law to act in good faith for the best interest of the company; to act properly; to not make secret profits; and to avoid conflicts of interest.
- Management Duties - It is the duty of the directors to manage the company with care. This generally means that decisions and actions should be taken that benefit the company.
- Compliance Duties - The directors are responsible for ensuring that compliance matters are dealt with both accurately and in a timely manner. This includes such things as registering with the Information Commissioner; taking out insurance; completing the Companies House annual return and maintaining the company register.
- Employment Duties - A director is responsible for the employment of his/her staff. This includes not only their contractual and statutory rights but also their general wellbeing and safety whilst at work.
- Dealing with Taxation - Directors are responsible for calculating and accounting for the tax that falls due from the company (including PAYE, NIC, VAT, Duty and Corporation Tax). Penalties and fines can be levied for errors and for fraudulent tax evasion this can lead to criminal action by the state.
- Insolvency - The directors are responsible for ensuring that the company is trading whilst solvent. Once they know that the company is insolvent they can be committing a criminal offence. The director has a duty to minimise the potential losses of creditors if the company is in financial trouble otherwise the director could be liable to prosecution.
- Is it essential for the company to have a Company Secretary?
No, since the Companies Act 2006 was introduced it is no longer a legal requirement for a private limited company to have a Company Secretary. However the Company Secretary has some important responsibilities, so the decision not to have one should not be made lightly. This includes keeping the company register up to date, ensuring that the relevant returns are filed, taking minutes at board meetings, notifying Companies House of changes to the company and resolutions that are passed etc.
If a company does not appoint a Company Secretary, it will be the responsibility of the directors to undertake these tasks. For this reason, many companies choose to appoint a professional Company Secretary to undertake these tasks on their behalf. Wisteria Formations can provide this service through Wisteria Registrars Limited.
- What are the duties of a Company Secretary?
The duties of a Company Secretary include:
- Statutory filing requirements – This includes documents such as the Companies House Annual Return and statutory annual accounts.
- Meetings – The role can also include convening meetings and arranging all documentation in relation to a meeting, such as preparing the agenda and minutes.
- Registers – A Company Secretary is responsible for keeping the company registers up to date.
- Communicating with shareholders - shareholders are kept updated by the Company Secretary through notices and reports and the Company Secretary will also organise dividend payments.
- Company Appearance – The company name must appear at the registered office and on items such as stationary, contracts and invoices. The Company Secretary must make sure that it appears correctly in all of these places.
- Advisory - They may also act as an advisor to the directors of the company in areas such as best practice and legal compliance.
- Other - In some cases they might be required to keep the company seal secure if the company has one and maintain a record of structure if the company is part of a group, plus many more specific roles.