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What is Director?

A director is a person responsible for running a company and making decisions on its behalf. They have legal duties to the company.

Example

As director, you decide company strategy, sign contracts, and are legally responsible for filing requirements.

Key Dates

Director changes must be filed with Companies House within 14 days

How Director Works in Practice

A director is an officer of the company appointed to manage its affairs and make decisions on its behalf. Directors have significant legal responsibilities under the Companies Act 2006, including seven statutory duties that they must fulfil at all times. A private limited company must have at least one director who is a natural person (a real individual, not another company), and there is no upper limit on the number of directors.

The seven statutory duties of a director are: to act within their powers (follow the company's constitution), to promote the success of the company for the benefit of its members, to exercise independent judgment, to exercise reasonable care, skill, and diligence, to avoid conflicts of interest, not to accept benefits from third parties, and to declare any interest in proposed transactions. Breach of these duties can result in personal liability, disqualification, or even criminal prosecution.

Directors are responsible for ensuring the company meets its legal obligations, including filing annual accounts and confirmation statements with Companies House on time, filing Corporation Tax returns with HMRC, running PAYE payroll correctly, maintaining statutory registers, and holding board meetings and keeping minutes. Failure to meet these obligations can result in penalties against the company and, in serious cases, personal liability for the director.

From a tax perspective, directors of their own companies have a unique position. They can choose how to extract money -- through salary, dividends, pension contributions, or other methods. The most common tax-efficient approach for a director-shareholder is to pay a small salary (usually around £12,570 or the NI Secondary Threshold) and take the remainder as dividends. Directors must also be aware of their obligations regarding benefits in kind, director's loan accounts, and the requirement to file Self Assessment returns.

Step by Step

A director is appointed by the shareholders (or by the existing directors if the articles allow). The appointment must be notified to Companies House using form AP01 within 14 days. Similarly, resignations or removals must be filed using form TM01. The director's details (name, date of birth, nationality, occupation, and residential address) become part of the public record, though the residential address can be suppressed using a service address.

Day-to-day, directors make operational and strategic decisions for the company. Major decisions are typically recorded in board minutes. While there is no legal requirement for the frequency of board meetings in private companies, best practice is to hold at least one per year (for the annual accounts) and to minute key decisions including dividend declarations, salary changes, and significant contracts.

Directors can be employed by the company (and most director-shareholders are) or serve in an unpaid capacity. If employed, they are subject to PAYE like any other employee, but with some specific rules -- for example, directors' NI is calculated on an annual basis rather than per pay period, to prevent manipulation of payment timing. Directors must also file Self Assessment returns if they receive any untaxed income such as dividends.

Practical Tips

  • Keep formal board minutes for all major decisions, especially dividend declarations, salary changes, and contracts -- these are your evidence if HMRC or creditors ask questions
  • Use a service address (such as your accountant's address) to protect your home address from the public Companies House register
  • Set up reminders for all filing deadlines -- late filing penalties are automatic and cannot be appealed on grounds of ignorance
  • Take directors' insurance (D&O insurance) if your company has employees or significant contracts -- personal liability claims can arise from employment disputes, contractual failures, or insolvency

Common Mistakes to Avoid

  • Not filing changes with Companies House within 14 days of a director appointment, resignation, or change of details
  • Failing to recognise personal liability risks -- directors can be held personally liable for company debts in cases of wrongful trading, fraudulent trading, or personal guarantees
  • Not keeping adequate board minutes, especially for dividend declarations -- without minutes, HMRC may challenge whether dividends were properly declared
  • Ignoring the requirement to file Self Assessment returns as a director, even if all income is taxed through PAYE

Frequently Asked Questions

Can I be a director of more than one company?

Yes, there is no legal limit on the number of directorships you can hold. However, you must fulfil your duties to each company and avoid conflicts of interest. If two companies compete or contract with each other, you must manage the conflict carefully.

What is the difference between a director and a shareholder?

A director manages the company and has legal duties to it. A shareholder owns the company and has rights to dividends and voting. In small companies, the same person is usually both, but they are legally distinct roles with different responsibilities.

Can I be disqualified as a director?

Yes, the Insolvency Service can apply to court to disqualify a director for unfit conduct, including persistent failure to file accounts or returns, trading while insolvent, or fraud. Disqualification can last from 2 to 15 years and makes it a criminal offence to act as a director.

Do I need a service address?

Yes, every director must have a service address on the public register. This can be the company's registered office or another address you choose. Your home address is also filed but can be suppressed from public view using the service address facility.

Am I personally liable for company debts?

Generally no -- limited liability protects you. However, you can become personally liable if you gave a personal guarantee for a company loan, if the company traded while insolvent (wrongful trading), or if you engaged in fraudulent trading.

Source: Companies House director guidance: https://www.gov.uk/running-a-limited-company/directors-responsibilities and Companies Act 2006 duties: https://www.legislation.gov.uk/ukpga/2006/46/part/10/chapter/2

Related Terms

Shareholder

A shareholder is someone who owns shares in a company. They're entitled to dividends and have voting rights on company decisions.

Company Secretary

A company secretary is an officer responsible for ensuring the company complies with legal and administrative requirements. Optional for private companies.

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