Definition of a Company Director
A company director is an individual or organisation who is legally responsible for the running and management of a company on behalf of shareholders. A director should oversee the day-to-day operations of the company, and ensure that they are compliant with any statutory requirements, and the regulations of the industry in which they operate.
Responsibilities of a Company Director:
There are many responsibilities that a director has when running a company, as mentioned above, but let’s discuss these in further detail.
1. Company Strategy - A director is a key part of determining company stagey by creating a business plan with objectives and goals for the company to achieve within a given timeframe.
2. Business Operations - The director is responsible for monitoring the daily operations of the business to ensure that business decisions support its goals and objectives.
3. Oversea Company Finances - A director is in charge of managing the company’s finances by checking all of the income that comes into the business (such as sales, investments, loans, etc.), and also all of the expenses that the business incurs to ensure there are no discrepancies.
4. Appointing Management - Typically, the director would be responsible for selecting candidates for more senior positions, whether they be other directors or business managers. Often, the director meets with the board of shareholders to discuss and appoint someone together.
5. Statutory Filing Requirements - Similar to keeping track of the company’s finances, a director is responsible for ensuring that the business is up to date with its statutory filing requirements. This would typically include submitting the annual corporation tax return filing to HMRC or the annual accounts filing to Companies House.
You can find out more about annual filing requirements in our article ‘What Returns does a Company Need to Make Each Year?’ Or if you need to file for a company, take a look at Easy Digital Filing for additional services.
This may sound like a lot of responsibility for just one person – but that’s where appointing other directors can come in handy! Before we dive into that, let’s discuss whether there are any limits to who can be your director, or how many there can be.
Are there restrictions on how many directors a company can have?
A company must always have at least one 'natural' director at all times - this means that while a company could be a director, it cannot be the only one. You must always have at least one individual as a director, whether they are the sole director or one of the company's multiple directors. So essentially, the sole director cannot be a company, but it could be an individual.
You may be thinking – since there is a minimum requirement to the number of directors that a company can have, is there also a limit? Well, the answer is no. There is no maximum number of directors that a company can have, and often times companies will elect multiple directors to help cover different aspects of the business. For example, you may have one director who is in charge of the business strategy, another who is in charge of the day-to-day operations, and someone else who is in charge of the company’s finances.
While the Companies Act 2006 does not state a maximum number of directors that a company can have, there is a way that companies can limit this within their articles of association, which are submitted when the company becomes incorporated. If the director(s) decide that they want to set a limit of 5 directors to be appointed at any one time, then they can state this within their articles of association.
Please read our article ‘Can I be the only person in a Limited Company?’ to find out more about the advantages or disadvantages about being the only company director.
Removing and Appointing Directors on Companies House
If the sole director of a company leaves or is removed, you will need to appoint another individual to be the new director. This change needs to be officially made with Companies House, and all related information will be publicly viewable the Companies House register. This might sound a little scary but don’t worry – we’ll break it down for you below!
- When a director is removed, the company must issue a TM01 form to Companies House within 14 days to make an official termination on their records. Note that even after the director is removed their name, month and year of birth, nationality, occupation and service address will remain on the register.
- Companies House must also be notified regarding the appointment of a new director, including their information as noted above for them to update the public register to reflect the changes; the company's internal records must also be updated.
Steps to appoint a director:
Step 1 – The existing board of directors must choose a new individual that they wish to appoint as director. A majority of the members must approve this appointment and pass an ordinary resolution.
Step 2 – The new chosen director must sign a letter of consent confirming that they are happy to act as a director for the company.
Step 3 – Once the appointment has been made and the consent form signed, you must notify Companies House about the changes to your company. You will be required to complete and submit an AP01 form – which includes all of the details of the appointment of the director.
Details include:
- Company name and registration number
- The date that the new director is being appointed
- The personal details of the new director (this includes their full name, date of birth, nationality, and occupation)
- A residential and service address for the new director
It is important to note that some of these personal details will be available to the public on the Companies House register.
To appoint a company as the new director, the process is very similar, however, you will need to file an AP02 form instead.
Here are the details required for this form:
- Company name and registration number
- The date the company will be appointed
- The registered office address of the company
- The governing law that the company falls under
- The name of the director of the company
Once the forms have been completed and submitted to Companies House, the newly appointed director will appear within the ‘People’ section on the Companies House website for your company.
If you incorporated with Easy Digital Company, you can purchase our ‘New Officer’ add-on package for us to complete and submit the forms to add a new director for only £26.80 + VAT. Existing users can find this service within their company dashboard.
Can I be the director of more than one company?
You can be the director of multiple companies under the UK law, although it is important to ensure that if you do become the director of multiple companies, that you are still able to fulfil your duties by attending meetings, helping set strategic goals for the business, managing the day-to-day operations. Directors can be personally liable if they are not able to help their company meet legal obligations, so it is important not to overbook yourself so that you can keep on top of filing requirements for each company. Please read our article ‘Am I personally liable if my company goes bust?’ to find out more about this!
One notable challenge of being the director of multiple companies is the potential for conflicts of interest to arise – especially if you are the director of multiple companies within a similar industry. It is a directors’ duty to ensure that the interests of each company are considered separately and objectively to ensure that any conflicts of interest are handled equitably for the companies involved.
Company Director Reasons for Removal:
There are many reasons why a director may be removed from a company, however, it is important to ensure that the resignation process is in accordance with the rules set out in the company’s articles of association, shareholder’s agreement, and even the Companies Act 2006.
- Voluntary Resignation - This is typically when a director has voluntarily resigned themselves from their position as director of the company, and are willing to leave the company.
- Removal Under Articles of Association - The articles of association, which are created when the company is incorporated, typically include certain circumstances which would require a director to be removed. It could be that they are unfit to be in their current position, or they are breaching the legislation as stated in the aforementioned Companies Act.
- Removal by Shareholders - The shareholders may choose to remove a director if they feel that the director is either not fulfilling their duties or is unfit to act in that position, but they must back this up with evidence. In this case, the board of directors and shareholders will hold a vote and if the majority (51% of the board or more) agrees that they should be removed, then they can put this in motion.
- Removal by an Authority - If a director does not meet their statutory responsibilities and duties as stated within their role, then an authority, such as HMRC or Companies House, may disqualify the director and terminate their position within the company.
Once the director is removed, you will be required to submit the TM01 form to Companies House to notify them of the resignation, usually within 14 days of termination.
To Conclude...
Hopefully after reading this article, you have a better idea of what a company director is, their duties, how to appoint or remove directors. Let’s recap some of the key parts below:
- A director is someone who is legally responsible for running the company that they are appointed to. This can include managing the day-to-day operations, ensuring the company is compliant and meets its statutory requirements.
- You can be the director of more than one company as long as you stay on top of your duties!
- You can appoint a company to be a director, however, every company must have at least one 'natural' director.
- To appoint a new director, you need to file the AP01 form (for a natural director) or the AP02 form (for a company director)
- To remove a director, you will need to file the TM01 form to Companies House.
If you are not yet a director, but are looking to incorporate your own limited company, we would recommend reading our ‘Guide to Incorporating a Company and Running a Small Business’ to get started!
