Company Duties

Running a limited company involves certain duties which have to be undertaken by the Directors and Company Secretary.
This article points out the main duties that need to be remembered when being involved in the administration of a private limited company.

Separate Legal Entity
One vital point to remember is that a company is a separate legal entity.
It is a legal person in its own right, quite separate and distinct from those who own it,
(being the members, usually the shareholders) and from those who run it, (the directors).
This founding principle of company law, as established in the case of Salomon v. AC Salomon Co Ltd (1897) AC 22,
has often been the cause of many court cases where people fail to recognise the difference between business people and the companies with which they are involved.

Capital
There is no statutory minimum or maximum capital amount for a private limited company.
It is possible for a company to have only one member and for that member to have only one share but, this is exceptional.

Limited Liability
A company may have limited liability for its members.
If the company is unable to pay its debts and is put into liquidation,
the members will not be required to contribute more than they have actually paid or agreed to pay towards settling its debts (s.3 CA 1985).

Memorandum and Articles of Association
Every company must have a Memorandum of Association which details (s.2 CA 1985):

  1. the name of the company - s.2(1)(a)
  2. whether the registered office is to be situated in England and Wales, or in Scotland - s.2(1)(b)
  3. the objects of the company - s.2(1)(c)
The memorandum must be signed by each subscriber in the presence of at least one witness.
A company may not alter the conditions contained in its memorandum except by express provision of the Companies Act.

The 'objects' of the company are a statement as to what the object of the company is.
The statement of a company's object can be a 'general commercial company'.
In this case the object of the company is to carry on any trade or business whatsoever.
\ If the objects are more specified and the company wishes to alter them,
they have to be altered by a special resolution (s.4 CA 1985 as substituted by s.110 (2) CA 1989).

In the case of a company limited by shares,
there must also be Articles of Association (s.7(1) CA 1985).
The standard form for articles of a company limited by shares is known as 'Table A'
and this can be used in its entirety to constitute the Articles of a company (s.8 CA 1985).
Table A is as prescribed by regulations made by the Secretary of State.
The company can draw up its own Articles or modify Table A, but they must contain the rules for the conduct of the internal affairs of the company.

Directors
Every private company shall have at least one director (s.282 (3) Companies Act 1985).
Where the company only has one director, that director cannot also be the company secretary (s.283 (2) CA 1985).
There must be a separate individual holding the office of company secretary (s.283(2) CA 1985).
There are no legal qualifications that are needed by an individual to be a director of a company.

The director(s) are responsible for the management of the company.
Their powers can be restricted by the company's articles but, in most cases, they can do anything that the company can do.
The director(s), acting as and for the company, must ensure that the company does everything that it is legally obliged to do.
The decisions that are made by the director(s) must be made in the best interests of the company.
If they are not the decision will be 'ultra vires'.

The interests of the company are those of the shareholders as a whole.
They are not the interests of employees, individual shareholders or the director(s) themselves.

Directors are personally responsible for ensuring that accounts are prepared and delivered to Companies House.
It is not the responsibility of the accountant, if there is one.
Failure to deliver documents on time is a criminal offence which, on conviction,
could result in a director having a criminal record and a fine of up to £5,000 for each offence.

On average more than 1,000 directors are prosecuted each year for failing to deliver accounts and returns to the Registrar on time.
A director will normally have a maximum of 10 months from the accounting reference date in which to deliver the company's accounts to the Registrar.
The accounting reference date is the date to which your accounts must be prepared.

If accounts are received late, the company will automatically be charged a 'late filing penalty'.
These penalties can be in addition to any fine imposed by a court.
The late filing penalty will be calculated according to the following scale:

Length of Delay

  1. 3 months or less - £100
  2. 3 months one day to 6 months - £ 250
  3. 6 months one day to 12 months - £ 500
  4. More than 12 months - £1000
Company directors are responsible for delivering information to the Registrar, in particular:
  1. accounts (only for limited companies)
  2. annual returns (Form 363)
  3. notice of change of directors or secretaries or in their particulars (Forms 288a/b/c)
  4. notice of change of registered office (Form 287)
Accounts
All limited companies, whether trading or not, must keep accounting records and file accounts for each accounting period with the Registrar.
Subject to exceptions, the accounts will include:
  1. directors' report signed by a director or the company secretary
  2. a balance sheet signed by a director
  3. a profit and loss account (or income and expenditure account if the company is not trading for profit)
  4. an auditors' report signed by the auditor
  5. notes to the accounts
  6. group accounts (if appropriate).
Accounts must be produced to a standard so they can be scanned to reproduce electronically or on microfilm.

Annual returns (Form 363)
An annual return is a snapshot of general information about a company giving details of its directors and secretary, registered office address, shareholders and share capital.

Company Secretary
The Companies Act states that every company shall have a company secretary (s.283(1) CA 1985)
and that a sole director shall not also be a secretary (s.283(2) CA 1985).
The company secretary of a private limited company does not need any specific qualifications although,
the director should ensure that they appoint someone who can fulfil the tasks.
There are no duties or powers specified by the Act, they will usually be contained in a separate contract.

As the secretary is an officer of the company, they may be criminally liable for defaults committed by the company (s.744 CA 1985).
The liability could include failure to file: in the time allowed; any change in the details of the company's directors and secretary; and the company's annual return.
The company secretary usually undertakes such duties as:

  • maintaining the statutory registers - members, directors and secretaries and directors' interests
  • ensuring that statutory forms are filed promptly
  • sending the Registrar copies of resolutions and agreements
  • ensuring that people entitled to do so, can inspect company records


    • Single Member Companies
    Requirements inserted by the Companies (Single Member Private Limited Companies) Regulations 1992 - SI 1991/1699.
    One person may, for lawful purpose, by subscribing his name to a memorandum of association
    and complying with the other requirements, form an incorporated company (s.3A CA 1985 - as amended).
    If the number of members of a private company limited by shares falls to one,
    it should be entered in the company's register of members that there is only one member (s.352A CA 1985).
    The decisions of sole members shall be provided to the company in a written record (s.382B CA 1985).