Limited Company FAQ (UK) - Directors & Responsibilities

Benefits include:

• Access to limited liability (your personal assets generally protected from company debts)
• Potential tax efficiency (e.g., salary + dividends mix, company pension contributions)
• Professional credibility and easier access to contracts/clients
• Ability to build and sell/grow a business entity
• Control over company decisions (especially as sole director)
• Eligibility for certain benefits (e.g., state pension qualifying via salary)

However, public disclosure of some details (e.g., name/address on Companies House) is required.

Yes for many — especially if running a profitable business, needing liability protection, or planning growth. Benefits (tax efficiency, asset protection, control) often outweigh risks for small/medium businesses. Not worth it if very low profits, high personal risk tolerance (e.g., prefer sole trader simplicity), or unwilling to handle compliance. Weigh your situation with an advisor.

It depends. Directors manage day-to-day operations and make operational decisions (powers from articles/Companies Act). Shareholders own the company and have ultimate control (e.g., appoint/remove directors, approve major decisions like dividends or winding up via resolutions). In small companies, the same person is often both — giving full control. In larger ones, shareholders (especially majority) hold more long-term power over directors.

No — dividends are paid to shareholders only (pro rata to shareholding). A non-shareholder director can receive salary, expenses, or bonuses but not dividends. Common setup: director is also shareholder to access dividends (tax-efficient extraction).

People disqualified under the Company Directors Disqualification Act (e.g., for misconduct, insolvency offences), undischarged bankrupts (or under bankruptcy restrictions/Debt Relief Orders), those convicted of certain offences (e.g., fraud), or minors under 16 (in most cases). Also, some regulated professions have extra restrictions.

Directors are entitled to:

• Remuneration (salary/fees) if approved (often via service contract or resolution)
• Reimbursement of reasonable business expenses
• Indemnity/insurance (company can provide D&O insurance)
• Access to company information/records
• Dividends if also a shareholder

Entitlements depend on articles, shareholders' agreement, or employment contract.

Under the Companies Act 2006, the 7 general statutory duties are:

1. Act within powers (follow constitution/articles)
2. Promote the success of the company (in good faith, considering long-term, employees, suppliers, environment, etc.)
3. Exercise independent judgment
4. Exercise reasonable care, skill and diligence
5. Avoid conflicts of interest
6. Not accept benefits from third parties (that cause conflict)
7. Declare interest in proposed transactions

These apply to all directors; breach can lead to personal liability or disqualification.

See the 7 statutory duties above (Companies Act 2006 ss.171–177). Additional duties include filing accounts/tax returns on time, maintaining records, paying taxes, and (in insolvency) prioritising creditors. You remain responsible even if delegating to professionals.

No strict "five functions" in law, but common descriptions include: strategy/leadership, oversight/governance, compliance/risk management, representing the company, and decision-making. Varies by company size; in small Ltds, often hands-on operations too.

Comply with 7 statutory duties (above), file statutory documents (confirmation statement, accounts, changes), pay Corporation Tax, maintain accurate records, avoid wrongful trading, and act in company's best interests. Breaches can result in fines, disqualification, or personal liability.

A managing director has the same statutory duties as any director, plus any extra powers/duties in articles or contract (e.g., day-to-day management, signing contracts). Often more executive role, but personal liability risks remain the same.

Generally not personally liable for company debts (limited liability). But you can be for: breach of duties, wrongful/fraudulent trading, personal guarantees, unpaid taxes in cases of deliberate neglect/fraud (HMRC Personal Liability Notices), unpaid PAYE/NI if misconduct, fines for non-compliance, or insolvency offences.

Directors cannot: act outside powers, misuse company assets, create undisclosed conflicts, accept secret benefits, trade wrongfully/insolvently, fail to file required documents, or breach fiduciary duties. Also, cannot usually bind company without authority.

Yes, in specific cases — e.g., personal guarantees on loans, breach of duties, wrongful trading (continuing when insolvent), fraud, HMRC debts via PLN for deliberate non-payment, or fines/disqualification.

Usually no — company pays its own taxes. But yes if deliberate neglect/fraud (HMRC can issue Personal Liability Notice transferring liability), or for PAYE/NI if misconduct proven. Common in insolvency if directors ignored warnings.

Generally no — company liability. But possible if personal guarantee, breach of duties leading to insolvency, or criminal offences (e.g., non-payment of NMW). In redundancy, employees claim from National Insurance Fund first.

Normally no (limited liability). Yes if: personal guarantee, wrongful trading, fraud, or specific tax offences. Creditors rarely pierce veil unless misconduct.

Common key ones: 1) Wrongful/fraudulent trading (insolvent trading), 2) Breach of director duties (e.g., misapplication of assets), 3) Personal guarantees or specific statutory liabilities (e.g., HMRC for deliberate tax non-payment).

No for genuine company debts (that's the point of limited liability). Yes only in exceptional cases like misconduct, guarantees, or offences (see above).

Responsible for company finances/compliance, but not personally for debts unless exceptions apply. You must manage prudently to avoid personal exposure.

No fixed "four powers" — depends on articles. Typical: manage daily operations, enter contracts, hire/fire staff, make decisions on behalf of board. Often broad authority delegated by board.

Powers from articles of association (model default gives wide management powers), board resolutions, and Companies Act. Includes running business, binding company in contracts, appointing agents, etc. Limited by duties and shareholder oversight.

Executive powers to manage (day-to-day, strategy), but subject to articles, board/shareholder approval for major actions (e.g., large loans, dividends). In sole-director companies, near-total control.

Operational control (decisions, contracts, hiring), but checked by duties, shareholders (can remove directors), and law. Maximum in small/sole-director setups.

Yes, if sole director (common) or if articles allow single-director decisions. Multiple directors usually act by board resolution (majority or unanimous depending on rules).

Buy Directors & Officers (D&O) insurance, seek indemnity in articles, keep good records/minutes, get professional advice (accountant/lawyer), avoid personal guarantees, monitor solvency, comply with duties/filings, resign if insolvent risks rise.

Limited liability shield (personal assets safe from most company debts), possible D&O insurance, qualified indemnity, statutory defences (e.g., reasonable diligence). No absolute protection — misconduct exposes you.

Usually no — limited liability protects personal assets like home. Yes if: personal guarantee on debt, wrongful trading proven, fraud, or director's loan overdrawn. Most insolvencies don't affect director's home.

Examples: wrongful/fraudulent trading, breach of duties (e.g., conflicts, misusing assets), failing to file accounts/tax, trading while insolvent knowingly, fraud, phoenixing companies. Can lead to disqualification or liability.

Some risk — compliance burden, potential personal liability in misconduct/insolvency. Low for well-run, solvent companies. Higher in high-risk sectors or poor management. Mitigate with advice/insurance.

Admin/compliance burden, public disclosure of details, personal liability risks (limited), disqualification potential, stress from duties/responsibility, time commitment, potential fines/prosecution for errors.

Under Company Directors Disqualification Act: misconduct (e.g., insolvency offences, wrongful trading), unfit conduct (persistent breaches, failing records), conviction for indictable offence connected to company, bankruptcy restrictions, etc. Court/Insolvency Service action; ban 2–15 years.

Statutory duties/liabilities, filing obligations, potential personal responsibility in breaches, disqualification risk, public record at Companies House. Must act responsibly or face civil/criminal penalties.

Personal for breaches (compensation, fines), tax debts in misconduct cases, disqualification, criminal sanctions (fraud). Company debts generally not personal.

No, except in cases of misconduct, guarantees, or specific offences (see above).

The company itself (limited liability). Directors/shareholders not personally unless exceptions (guarantees, wrongful trading, etc.).

Rarely — only if court pierces veil due to fraud/misconduct, or enforcement of personal liability (e.g., guarantees, wrongful trading judgment).

Resign by giving written notice to the company (board). File TM01 form with Companies House (online, £0–small fee). Notify fellow directors/shareholders. Resignation effective on notice date (no required notice period unless articles say otherwise).

Yes, but company needs at least one director (natural person). If all resign simultaneously, appoint replacement first or company may breach rules (risk fines). Last director can't leave without successor.

Resign via written notice + TM01 filing. Cease duties immediately (unless notice period in contract/articles). Company updates records; director no longer liable for future acts but remains for past actions.

Avoid inflammatory language, admissions of fault, blame, or threats — keep professional/neutral. Don't discuss confidential info or reasons that could imply misconduct. Simple: "I resign effective [date]."

Yes — resign anytime (no mandatory notice unless specified). But can't abandon if insolvent (wrongful trading risk). File resignation properly; ongoing duties/liability for past acts remain.

No statutory minimum — can be immediate unless articles or service contract specify (rare for small companies). Best practice: reasonable notice (e.g., 1 month) for handover, but legally can resign instantly with written notice.