Running a company means taking on duties set by the law. Directors must follow the Companies Act 2006 and other rules to keep a business on track. If you’re a director, it’s important to understand what’s expected. This post looks at company law basics, such as key responsibilities, the records you must keep, and the tax obligations for the 2025/26 tax year. It also offers tips on how to stay compliant and avoid penalties.
What the Companies Act 2006 says
The Companies Act 2006 sets out a director’s legal duties in the UK. These rules apply to any company registered with Companies House. The aim is to protect shareholders, creditors, and the wider public. If you don’t follow these duties, you risk fines, claims from shareholders, or even disqualification from holding directorships in the future.
Your core duties
Directors must act within their powers. This means following the company’s articles of association and using your authority for the benefit of the business. You also have a duty to promote the success of the company, which involves balancing the company’s long-term interests with the interests of employees, customers, and others.
You must use your own judgment and take reasonable care, skill, and diligence. That means you should come prepared to board meetings and understand the business well enough to make informed decisions. Avoid conflicts of interest and don’t accept any perks that could cloud your judgement.
If you’re involved in a proposed transaction, disclose any interest you have in that deal. This prevents misunderstandings and helps maintain trust. Directors should also keep in mind that board decisions might be challenged later, so it’s wise to keep a record of how and why you reached each decision.
Reporting and record-keeping
Company law in the UK requires directors to keep accurate records. You must file accounts and confirmation statements on time with Companies House. If you miss deadlines, you’ll face late filing penalties. For smaller companies, accounting obligations might be simpler, but they still need close attention.
You must maintain a register of directors, a register of shareholders (or members), and, in many cases, a register of people with significant control (PSC). Ensure these are accurate and up to date.
Financial records should be clear enough for someone to see the company’s position at any time. This includes invoices, receipts, contracts, and bank statements. If you’re not sure what to keep, we can advise you on the best approach – we have experience helping directors meet their obligations. If you’d like to know more, take a look at our services page.
Tax compliance for the 2025/26 tax year
Along with Companies House reporting, directors must deal with HMRC requirements. Corporation tax remains at 25% for profits over £250,000. Smaller profits may still benefit from relief. If you receive a salary or dividends, you may also need to complete a self assessment tax return each year.
Keep an eye on deadlines. The 2025/26 tax year runs from 6 April 2025 to 5 April 2026. If you pay staff, you’ll need to handle PAYE and National Insurance. If you’re VAT-registered, you must submit VAT returns by the due dates. If you need help managing tax, we can assist you – our tax compliance support takes the pressure off.
Director liabilities
If a company becomes insolvent or can’t meet its debts, directors might face personal liability under certain conditions. For instance, wrongful trading occurs when directors allow a company to keep trading while knowing there’s no real chance of avoiding insolvency. In such cases, a director could be made personally responsible for the debts.
Fraudulent trading, where there’s intent to deceive, carries more serious penalties. It can lead to criminal charges as well as fines and disqualification. This is why keeping track of your company’s financial health is so important. Regular cashflow reviews, checking credit control, and seeking professional advice early on can make a big difference.
How to protect your business and stay compliant
- Stay organised: Use a reliable diary or software to track filing and tax deadlines. Missing them can lead to penalties.
- Review finances regularly: Keep a close eye on cashflow. Track expenses, revenue, and future commitments.
- Know your limits: If you’re unsure about an area of company law, seek advice. It’s better to clarify questions than risk non-compliance.
- Keep detailed records: Store documents in a secure place. Back them up digitally if possible.
- Get professional support: An accountant can help you save time and reduce stress. Our team at PB Syddall & Co. has worked with directors across many different industries.
Consequences of non-compliance
Penalties vary but can include fines, damage to your company’s reputation, or bans from being a director. Shareholders can also bring legal actions if you breach your duties. Civil cases might lead to personal financial liability. Repeated or serious breaches could even result in criminal charges. By staying on top of your responsibilities, you reduce the risk and keep your business in good standing.
Final thoughts
Directors have a range of duties under UK company law. You must act within your powers, keep accurate records, and meet tax obligations. If you stay informed and get support where needed, you’ll protect your business and yourself from penalties.
If you’d like more guidance on company law basics, we can help. Contact our team for clear advice on staying compliant and focusing on what matters most – growing your business.