What is Director?

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.

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.