Over the recent years, HMRC has introduced many strict rules that have a big impact on Company Directors. There is no longer a “free ride”, where Company Director responsibilities for the company’s affairs were very limited. Now, being a Company Director means that he/she bears much more responsibility for the affairs of the company overall.
In a recent article by Richard Crump, published “Accountancy Age”, we learn about one Company Director, who has been banned for six years from controlling or managing a company. The Director, paid himself before ensuring that all creditors, including HMRC and PAYE are paid. All this came apparent during the insolvency procedures of the company. This sends an important message to all who are currently and will in the future, manage or be in charge of a company.
According to www.gov.uk, running a limited company , under the section : “Director`s Responsibilities”, we read the following legal requirements.
We list only a few:
1. Try to make the company a success, using your skills, experience and judgement.
2. Follow the company’s rules shown in its articles of association.
3. Make decisions for the benefit of the company, not yourself.
4. Keep company records and changes to Companies House & HMRC.
5. Ensure that the company accounts are “true and fair view”.
In view of the above, it is of paramount importance that all Company Directors and Managers are made aware of those responsibilities, and perhaps reminded of them now and then. Sadly, people are forgetful and often driven by materialistic needs of their own, and forget that though it is thier company, they are responsible for it materialy, financialy and personally.
Failure to follow the rules can result in fines, personal liability for the company`s debts, disqualification from acting as a director for up to 15 years, as well as imprisonment.
Directors are personally liable for certain actions taken while fulfilling their duties. Several laws give rights of action against directors in their personal capacity, including:
- The Insolvency Act 1986 which leads to personal liability where directors allow the company to trade wrongfully or fraudulently.
- The Health and Safety at Work Act 1974.
- Laws relating to the control and disposal of hazardous waste.
It is important also that the company chose the right advisors, who will be able to guide and answer any questions. That include the right Accounting practice, who will be able to ensure that all the company finances are in the right order and financial records comply with legal and statutory requirements. Allowing the Company Director and Employees to concentrate on their business.