Starting a limited company: legal duties for directors

So you've decided to incorporate. Congratulations — going limited gives you credibility, a separate legal identity and, usually, protection from personal liability. But it also brings legal duties that rest on you as a director. These aren't optional. Get them wrong and you could face fines, disqualification, or personal liability for company debts. Here's what small business directors in the UK need to know.

The role of a director: more than a title

Companies House lists you as a director. That role is defined by law, not by your shareholding or job title. You can be a director and an employee, or a director and a shareholder. The duties attach to the office itself. Even if you're the only director of a one-person company, you owe those duties to the company — acting in its interests, not just your own. You must be at least 16, not disqualified, and not an undischarged bankrupt (unless a court says otherwise). You'll need a service address, which becomes public; your home address can stay private if you use a separate service address.

The seven general duties under the Companies Act 2006

These apply to all directors, executive or not. Know them well:

• Act within powers. Use your authority only for its proper purpose.
• Promote the company's success. Act in good faith for the benefit of members as a whole, considering long-term consequences and stakeholders.
• Exercise independent judgment. Don't blindly follow a majority shareholder if it conflicts with the company's interests.
• Exercise reasonable care, skill and diligence. Use your actual knowledge plus what a reasonably diligent person in your role would have.
• Avoid conflicts of interest. Disclose and manage any personal interest that could conflict with the company's.
• Not accept benefits from third parties. No bribes or secret commissions because of your position.
• Declare interest in proposed transactions. Tell the other directors before the company enters into a transaction you're interested in.

Keeping statutory records

Every limited company must keep certain records. These aren't just for Companies House — they're for you, HMRC, and anyone with a lawful right to inspect them. At a minimum, maintain:

• Register of members — who owns shares, how many, and when transferred.
• Register of directors — names, service addresses, appointment and resignation dates.
• Register of people with significant control (PSC) — anyone with over 25% of shares or voting rights, or significant influence.
• Register of charges — details of mortgages or charges over company assets.
• Minutes of board and general meetings — decisions taken, especially on shares, directors, or borrowing.
• Accounting records — invoices, receipts, bank statements, contracts. Keep for at least six years from the end of the relevant financial year.

Usually keep these at the registered office or another place the directors choose. If not at the registered office, tell Companies House where they are. Failing to keep proper records is a criminal offence and can lead to fines.

Filing deadlines: Companies House and HMRC

Missing deadlines invites unwanted attention. Main ones for a small company:

• Confirmation statement. At least once every 12 months, confirming Companies House records are correct. Small fee.
• Annual accounts. First due 21 months after incorporation; then 9 months after the accounting reference period ends. Small companies may file abbreviated accounts, but HMRC and shareholders usually need full accounts.
• Corporation Tax return. Due 12 months after the accounting period ends. Tax itself usually payable 9 months and 1 day after.
• Change of details. File changes to directors, secretaries, registered office, PSC information, share allotments, and constitution within 14 days (21 for some changes).
• VAT returns. If VAT-registered, usually quarterly, due one month and seven days after the period ends.
• PAYE. If you employ anyone, including yourself as a director, file payroll submissions on or before each payday. Pay HMRC by the 22nd of the following month (19th if by post).

Tax and payroll: the director as an employee

Many directors take a small salary plus dividends. But dividends must come from post-tax profits, with proper documentation. Register for PAYE if you pay yourself above the National Insurance threshold, and you'll likely need a Self Assessment tax return. If you're the only director and take no salary, you may not need PAYE — but check National Minimum Wage rules for any other staff. Watch the director's loan account: borrowing more than £10,000 from the company can trigger a benefit-in-kind charge and a Corporation Tax liability unless repaid within nine months of the year end.

Personal liability: when the corporate veil can lift

Limited liability isn't absolute. Continue trading when you know or ought to know the company is insolvent, and you can be personally liable for wrongful trading. Fraudulent trading is a criminal offence. You can also be personally liable if you give a personal guarantee for a lease or loan, or breach health and safety, data protection, or environmental laws. Directors can be disqualified for up to 15 years for unfit conduct. The best protection is simple: keep proper records, take advice early if things get tough, and never treat the company's money as your own.