Overview Of Being Registered As A Company Director
Do You Want To Be Registered As A Company Director? Fundamentally it is axiomatic that you cannot run a Limited company without being a Director. If you want to take advantage of the benefits of trading through a Limited company then you will need to accept the appointment of the office of Director.
A problem with being a Director is that Limited liability companies do not enable Directors to be negligent and cause loss without providing for the prospect of a Director being personally liable to pay compensation.
When things go wrong it is possible that a Director can be sued for example by a Liquidator of an insolvent company who may have formed the view that a Director has breached their Director duties to the company and caused it to suffer.
Promote The Success Of The Company
If a Director causes negligent losses then the duty to promote the success of the company under Section 172 of the Companies Act 2006, places a Director at risk of being found to have breached a breach of statutory duty.
A failure to make a profit is not necessarily a breach of statutory duty because failure is permissible provided it does not arise from misconduct. Provided a Director has acted in the bests interests of the company, as opposed to in the best interests of themselves then causing a loss is forgivable.
If the company is solvent then it is within the gift of the shareholders to ratify a breach of Director’s duty if they so wish and absolve a Director of responsibility for compensating for loss they may have caused.
Formal Recognition Being Registered As A Company Director
Formal recognition as a Director is all well and good but it is the act of engaging in the running of a company that is key. If you are recorded as a Director and you have accepted such a company appointment it would be unreal to suggest that you were not a Director.
If you are formally registered as a Director it will be assumed that you have accepted the role of being responsible for taking decisions in relation to the company and if nothing else you are deemed to have the power to do so. The rationale is that the power to take decision is available to all registered Directors regardless of whether or not they chose to exercise that power.
Director In Name Only
If you are a Director in name only, then you have all of the responsibilities as a Director but you may have chosen to relinquish control of the company to someone else. In such an instance you had better trust whoever it is that you have permitted to do the running of the company or perhaps the more appropriate recommendation may alternatively be to roll up your sleeves, get your hands dirty and get fully involved in overseeing the company.
Does Formal Recognition Matter?
Formal recognition as a Director matters because it removes uncertainty. The uncertainty can be for both you and indeed anyone else who is seeking to understand who is operating the company.
If for example, a company goes into Liquidation, then the uncertainty could result for an individual who is not registered as a Director when they are being investigated as to their role in respect of the company.
Director In Control
However, what about if there are a number of parties involved in the running of a company and each party has different roles? Well, it depends, and it can sometimes be difficult to determine matters. Each case will be determined on its own facts because different organisations of different sizes will have different structures, which means that the actions of a Director of a company such as ICI will be very different to an SME Director.
Ultimately in the case of an SME, who ‘controls’ the company or takes relevant decisions will be all important in determining if they are a Director.
Are you a Director of a company?
If you are a Director of a limited company, Oliver Elliot can help you. We Know Insolvency Inside Out.
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Disclaimer: Do You Want To Be Registered As A Company Director?
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