Your company is now set up. Your registered office is fixed, your directors and secretary are in place, your shareholders have paid in their money and the rest of the formalities are complete.You must now carefully check through your responsibilities as a director. This chapter looks at those responsibilities in more depth and includes:

Fulfilling Your Responsibilities

Directors, as guardians of their companies, are appointed to manage the affairs of a company. This includes keeping the affairs of the company within the law and there are some legal requirements of the Companies Act which must be carried out.

Every director has a personal responsibility to see that certain documents are delivered to the Registrar of Companies. They include:

• the company’s annual accounts
• the Annual Return
• notification of any change of directors or their particulars
• notification of any change of secretary or their particulars
• notification of a change of registered office
• notification of any mortgages or charges levied on the company
• notification of any changes in the Memorandum or Articles of Association
• notification of the company going into liquidation or receivership.

 

If you fail to send in your accounts on time a rising scale of fines is imposed, which can amount to £1,000 in a private company, if the documents are over twelve months late. It only applies to accounts and is known as a late filing penalty. It is payable by the company. Note that there can also be fines levied on a director personally for not delivering accounts, but this would only be as a result of his prosecution for the offence and would be set by the court.

Failure to submit the other documents can also result in fines on the director personally.

Documents have to be sent to:

The Registrar of Companies
Crown Way
Cardiff CF4 3UZ

for companies in England and Wales. There are other offices if you prefer to deliver them by hand and these are in London, Manchester, Birmingham and Leeds.

For companies in Scotland documents should be sent to:

The Registrar of Companies
Companies House
37 Castle Terrace
Edinburgh EH1 2EB

There is also an office in Glasgow for hand deliveries.

A number of companies delegate the responsibilities for sending in documents to their accountants or financial advisers as they usually prepare the accounts and are in possession of the other relevant information. Again beware. It is your job as a director to make sure the job is being done.

Finally, all this statutory information is needed to make it available for public inspection. This enables other individuals or businesses to form a view of a company with which they may wish to deal. It is also part of the protection which is necessary if companies are going to have the benefit of limited liability.

Case Study: Dean Delegates

Dean has noted the long list of his legal responsibilities and decided that he will delegate these to his accountant. Although his mother is the company secretary she is not fully familiar with company law and is also happy to see someone who is dealing with the company formalities. The accountant explains that the necessary forms will be completed when die accounts are prepared and, although there will be a small charge for the extra work involved, he will see that all the forms are dealt with on time. All Dean has to do is check that the forms do come with the accounts when they are sent to him.

Wrongful Trading

As a director you ought to know if your company is insolvent, ie has no assets with which to pay debts owed by the company. If it is, you are duty bound to declare the company insolvent and go into liquidation, which is the process used to wind up the business of a company.

You also owe a duty to the creditors of your company (ie businesses or individuals the company owes money to) not to continue trading when there is no reasonable prospect of avoiding liquidation.

If the company goes into insolvent liquidation the liquidator may apply to the court if he can prove that you knew, or ought to have known, prior to the liquidation that the company could not avoid taking that course. This is known as wrongful trading.

In these circumstances the court would make you personally liable to contribute to the company’s assets and disqualify you from being a director again for up to 15 years. You will not be liable, however, if you can show that you have taken every step, prior to liquidation, to minimise the potential loss to the company’s creditors.

Further if you knowingly intended to defraud your creditors it is fraudulent trading. You may still be expected to contribute to the assets of the company but may additionally be fined or even imprisoned.