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What are my obligations as a Director and/or Secretary if I have a Limited Company?

Being a Director and/or Secretary has Real Responsibilities

It is important to note that becoming a Director or Secretary has real responsibilities, duties (a fiduciary duty in law) and penalties under the current UK Companies Act 2006. When accepting such a post it is important to note that it is the company that you owe a duty of care to, which includes the shareholders, if different from the director(s)/secretary. In layman’s terms, it basically means doing all you can to protect the interests of the company (shareholders), keeping within the law and, in particular, not using any information garnered from holding such a position for one’s own or a 3rd party’s personal interests.

With effect from the 1st of October 2007, the duties of a Director(s) of a UK company are:

  • S.171 of the Companies Act 2006: The duty to act within the powers prescribed by Statute and the said company’s memorandum (which basically states what a company can do) whilst the articles of association deal with how a company should be administered, the rights of all parties involved with the company namely the director(s), secretary and shareholders. The articles will also provide information on how basic and special resolutions must be held, the rights of shareholders including the rights that are ascribed to particular types of shares including ‘ordinary’ shares and ‘preference’ shares which might have special powers relating to voting or give extra or less rights to distributed dividends;
  • S.172 of the Companies Act 2006: Under this section it is clear that directors have an absolute obligation to act in the best interests of the company. Within this section there are 6 separate factors to consider including, but not limited to, the consideration of the company’s employees, the long-term consequences of a decision, the equity or fairness to shareholders of a particular decision and finally the impact of the decision upon the community and environment at large;
  • S.173 of the Companies Act 2006: Under this section it is clear that directors must exercise independent judgment and cannot act as mere nominees for others no matter how or by whom they have received their position;
  • S.174 of the Companies Act 2006: This section expresses what, in effect, was the old fiduciary duty of a director but extends such duties to take all necessary care, diligence and exercise objective reasonable skill to non-executive and/or nominee directors;
  • S.175 of the Companies Act 2006: The deals with the requirement of directors to try and avoid ‘conflicts of interest’ especially where family members are concerned;
  • S.176 of the Companies Act 2006: This requires directors not to accept benefits (direct or indirect) from 3rd parties; and finally
  • S.177 of the Companies Act 2006: This again seeks to keep all company transactions transparent and declare any interest in transactions or arrangements involving the company.

What are my duties as a Director/Secretary?

 

With effect from April 2008, the duties of a Secretary (if appointed) of a UK company are:

With effect from April 2008, the Companies Act 2006 eliminated the requirement for a limited company to appoint a company secretary but where appointed their duties are mainly administrative in nature and may well include the following:

  1. Arranging and organising company meetings, ordinary and extraordinary resolution meetings and annual general meetings
  2. Maintaining the company combined register
  3. Taking responsibility for submitting, mostly electronically today, all Companies House annual return and company amendment documents
  4. Arranging the annual general meeting (AGM) for shareholders if required
  5. Signing off the annual accounts for submission to the Inland Revenue and Companies House