If you are thinking of forming a new limited company, you should be aware of the legal requirements you have to meet as a limited company director, on behalf of the company.
Directors’ Duties
The Companies Act 2006 sets out the main duties a limited company director has upon appointment to the post, and when operating the company:
- A duty to act within your powers as a company director
- A duty to promote the success of your company
- A duty to exercise independent judgement
- A duty to exercise reasonable care, skill and diligence
- A duty to avoid conflicts of interest
- A duty not to accept benefits from third parties
- A duty to declare interest in proposed transaction or arrangement with the company
In addition to these general duties, there are also a number of specific financial and legal responsibilities you should be aware of when you form a new company.
Although you will appoint an accountant to take care of much of your company administration, the directors are ultimately responsible should anything go wrong. You should be aware of any statutory or financial deadlines the company has, and ensure that your accountant files information accurately and on time.
Legal Responsibilities
- You must submit and file a Confirmation Statement, (this replaced the old Annual Return in June 2016) which includes an up-to-date PSC Register, every year to Companies House.
- You must let Companies House know if any of the information it holds relating to your company changes at any time. This includes changes in the names and addresses of company officials, a change to the company’s registered office address, or changes to the structure of the share capital. You can inform Companies House electronically of most of these changes via the WebFiling system.
- You must always act in the interests of the company’s shareholders, and must not enrich yourself in a way which could cause harm to the company.
- You must ensure that the company complies with all relevant laws and regulations which are in place at the time – including those which relate to hiring staff.
Financial Responsibilities
- The company must maintain accurate financial records at all time.
- The company must submit annual accounts to Companies House.
- Your must submit the company annual corporation tax return (CT600) to HMRC, and pay its liabilities before the deadline (this must be done electronically).
- You must only declare dividends when post-tax profits are available to distribute. Failure to do so may result in an illegal distribution to shareholders.
- You must ensure that the company can meet all of its outstanding financial liabilities, and trade solvently at all times.
- You are responsible for paying your staff, and deducting the correct amount of income tax and National Insurance Contributions from your employees.
More on limited companies
You can find out more about limited companies and their administration in these other ByteStart guides;
- How to set up a limited company
- Which business structure should you choose for your new business – sole trader, limited company, partnership or LLP?
- 10 advantages of running your business as a limited company over being a sole trader
- Can directors be personally liable for a company’s debts?
More on starting and running your own business
ByteStart is packed with help and tips on all aspects of starting and running a small business. Check out some of our most popular guides;
Starting Up
- 5 things you must do when you go self employed
- 10 Do’s and Don’ts of writing a business plan
- How to choose the best online accounting software for your business
- A 60-second guide to Value Added Tax (VAT) for start-ups and small businesses
- 15 Questions to ask when hiring an accountant for your new business
Funding your business
- How to maximise your chances of securing a small business loan
- A Guide to ‘Alternative Finance’ – the new funding options for startups and small businesses
- Finding finance for your new business – funding advice for start-ups
- How peer-to-peer lending offers businesses a new funding option
- What to do when the bank says “NO”!
Money & Tax matters
- 10 ways small business owners can pay less tax
- Sole trader tax – a guide for start-ups and the newly self employed
- Dividend tax changes from April 2016 – A summary of the financial effects for small business owners
- ByteStart’s Guide to the main business taxes
- Corporation Tax – How to reduce your bill
Leading a business
- Developing your startup’s greatest asset – YOU
- The Founder’s dilemma – Managing the transformation from start-up to growth business
- Building your resilience to help you cope with the ups and downs of starting and running your own business
- 6 common leadership traps to avoid in your new business
- Why the best leaders do less
Going for growth
- The 3 issues you’ll need to overcome if you want your start-up to reach £1m turnover
- How finding a great mentor could help you to grow, and your business to flourish
- Barriers to growth – how to identify them and how to overcome them
- How to avoid self-destruction and achieve your business goals
- The 4 Rs of getting more business from your existing customer base
Legal issues
- Which types of insurance must your business have?
- Becoming an employer – Your responsibilities when you hire staff
- Health & Safety compliance for small businesses – where do you start?
- A Guide to the National Living Wage for small business owners
- Why it’s vital you have clear ‘Terms & Conditions’ for your business
