Who Can Be a Company Director? | Your Virtual Office London

There are not many hurdles for an individual to overcome in order to become a director of a UK limited company.  The question of who can be a company director is answered below, making it clear that the position is not necessarily as unattainable as it sounds.

Although no specific qualifications are needed, a number of key roles have to be fulfilled. This is in addition to the company director’s role of fulfilling obligatory tasks, such as establishing a business address.

Definition of a Company Director

Before recognising who can be a company director, it’s important to understand the definition of a company director.  A limited company chooses a company director to oversee its finances and its business’ daily activities. A company director is required to act with integrity and abide by the law in order to make verdicts that can help the business grow. He or she can bind the company into valid contracts with third-parties (buyers, lenders, suppliers etc) and act as trustees for a company (but not the individual stockholders).

The Business Directory defines a company director as:

“An appointed or elected member of the board of directors of a company, who with other directors, has the responsibility for determining and implementing the company’s policy. A company director does not have to be a stockholder (shareholder) or an employee of the firm, and may only hold the office of director. Directors act on the basis of resolutions made at directors’ meetings, and derive their powers from the corporate legislation and from the corporate legislation and the company’s articles of association.”

With sound judgement and experience, a company director should endeavour to make a company successful through the promotion and achievement of its company’s goals.

Who Can Be a Company Director? The Key Roles

Company directors are a unit of “board of directors”, albeit the board can delegate certain powers to a board committee or a single company director.

The key roles and responsibilities of a company director are outlined in the Companies Act 2006, the articles of association, and any service contract that may be active between a director and the company.

According to the Companies Act 2006, company directors must:  

1.      Act Within Designated Powers

A company director has to adhere to the constitution of a company and comply with the company’s policy and tasks — this can include the articles of association and wider constitutional implications, for example, shareholder/joint venture agreements.

2.      Promote the Success of the Company

A company director must exercise the values of the company and success so that the company can last for a long time and thrive. The Companies Act states that a director have to have regard to, but not be limited to:

• The potential consequences of any decision in the future
• The company’s interests and the interests of the employees
• The issues concerning the company’s business relationships with suppliers, customers and others
• The company’s perspective and association with environmental and community operations
• The commitment of ensuring the company’s reputation for high standards of business conduct
• The obligation to act fairly and justly between company members

3.  Carry Out Independent Judgement

A company director must use independent judgement. They have to take on the responsibility and accountability of making independent decisions. However, the company’s constitution must always be obeyed.  

4.  Consistently Exercise Reasonable Skill, Care, and Diligence

A company director has to observe the same skill, care, and diligence as any other employee with:

• the general knowledge, skill, and experience that may reasonably be expected of a person carrying out the same functions in relation to the company.
• the general knowledge, skill and experience that possessed by the company director.

Note: A director’s actual understanding and skills may not be enough if more could reasonably be expected of someone in his or her position, therefore a sense of recognising and adapting to the reality of individual knowledge base is key.

5.  Avoid Conflict of Interest

A company director has to avoid a situation where a conflict of interest may arise.  This is particularly important when it comes to exploitation of property, information, or opportunity. A conflict of interest must be avoided even if it may be beneficial to the company.

6.  Reject Benefits from Third Parties

A company director cannot accept any form of benefits from third parties. If no conflict is likely to be deemed from the benefits, then the deal in question will not be considered to be an infringement.

7.  Declare Interests in Proposed/Existing Transactions/Arrangements with the Company

A company director has to declare the extent of any interest, transaction, or arrangement with the company (directly or indirectly) to the rest of the company directors.

No infringement will be recognised if:

• A conflict of interest is not likely to occur as a result of reasonable analysis to determine such a conclusion of the transaction.
•  An interest has not been declared because a company director is unaware that they possess the interest, or that the other directors are aware of the interest.

Remember...

It is not the directors, but members, who own the company. However, directors and members are normally the same individuals. A limited company is also responsible for its own debts. However, directors are personally responsible for ensuring the company complies with the law.

And remember, a company can have many directors (and shareholders) during company set up and any time thereafter.

For more information about the roles of a company director and how you can set-up your own business with a virtual business address, contact our professional and experienced team, today.