Companies House, and in particular The Companies Act 2006, set out the obligations and responsibilities of directors. These are commonly referred to as the “Directors’ Duties”. When you are appointed as a director of a limited company, Companies House normally sends you a letter like this:
Please take time to read the letter and examine the details carefully. As accountants, we are perfectly aware of the directors’ duties and expect all clients to be in the same position. There is a duty to always act in the best interest of the company. That’s not the same thing as you own personal best interest.
In particular, there is a duty to exercise reasonable care, skill and diligence as set out at s.174:
(1)A director of a company must exercise reasonable care, skill and diligence.
(2)This means the care, skill and diligence that would be exercised by a reasonably diligent person with—
(a)the general knowledge, skill and experience that may reasonably be expected of a person carrying out the functions carried out by the director in relation to the company, and
(b)the general knowledge, skill and experience that the director has.
You can avoid a lot of aggravation with your own customers and suppliers (and with your accountant) if you follow the directors’ duties. Most importantly, it is the director who is responsible in law for submitting accounts and tax returns on time. In law, it is not the accountant. We help you to meet your directors’ duties. And you need to exercise reasonable care, skill and diligence in providing us with the right material in a timely manner. Thanks!