Essential reading for directors of small businesses.

Are you a company director?

Are you aware of your responsibilities as a director?

Do you know what the government expects of you as a director?

Answering NO to any of the above questions poses a serious risk to you and your business. Being a company director is a responsibility not to be taken lightly. The scope and nature of a Director’s general duties and responsibilities is determined by law. Directors are not only responsible for running the business but they are also responsible for ensuring that the company complies with all the legal and regulatory requirements.

Failure to discharge your directorship with due diligence can result in fines, legal persecution, potential criminal charges and disqualification from future company directorships for between two to 15 years in the UK. I don’t expect it will be significantly different in other countries.

We’ve all heard and read about  MG Rover’s infamous Phoenix four . The Phoenix four are the four directors who were responsible for running the MG Rover Group. Although, these four directors claim not to have done anything wrong, they have still voluntarily forfeited company directorships for between 2 to 6 years due to the level of loss and public interest in the case. In my opinion they have been fortunate because the rules are stricter for public limited companies and they could have faced stricter penalties.

What does this have to do with being a small business director?

Strictly speaking, being the director of a small company is no different from a large company because you will be held accountable for failure to discharge your duties properly. It doesn’t matter that you are the director of your own limited company.

Once incorporated, a business assumes its own legal identity separate from you the owner’s identity hence any misappropriation of the companies funds is illegal. This is the same reason why forming a limited company protects your personal assets in case of insolvency or lawsuits. An incorporated company is its own legal entity, it has its own name, rights and responsibilities and can own its own assets and liabilities. It can sue or be sued in a court of a law.

Causes of disqualification from future directorships include failure to keep proper accounting records, failure to prepare and submit appropriate accounts and returns to the appropriate authorities and any conduct that constitutes fraudulent trading.  Read my post “The cost of poor record keeping for more on why you should keep good accounting records for your small business.

If you have employees then as a director you are required by law to ensure the health and safety of your employee at work and to comply with employment law in all dealings with employees.

It may seem like alot but these duties are not tall orders. Some of your responsibilities can be outsourced so that you have the time and peace of mind to focus on getting new business through your doors.

Larger companies with deep pockets take care of their directors, they train them and keep then updated with any changes in law. As a small business you are responsible for keeping yourself in the know. Ignorance is no excuse in a court of law. The question YOU need to ask yourself is:How can I keep my self on the right side of the law in discharging my duties as a director of my small business?

How are you going to do this? You can attend regular training courses, read on the subject or get a trusted advisor you can call on.

This post is not meant to scare anyone from forming a limited company, having a limited company has a lot of benefits. My next post will delve into the benefits of registering your business. Stay tuned.

If you found this post useful, then please leave a comment or share your experiences as a small business director. It is always good to get feedback.

Do you need one on one support in understanding and putting the right systems in place in your limited company? Get in touch and it will be my previlege to assist you through this process.  Email me with any questions you have about your directorship at






Griselda K Togobo

by Griselda K Togobo | Follow Her on Twitter Here

This Post Has 3 Comments

  1. Sonia

    Great post. Keeping me on my toes Griselda.

    1. Griselda K Togobo

      We all need people to keep us on our toes, so I’m glad I’m doing that for you :-). Thanks for commenting.

  2. Pingback: rogue director, Dealing with the sharks, rogues and swindlers in business

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