Becoming Director for the First Time

[als-uk]

Hey all

Hope you are well

I have been offered to opportunity to become a Director of the business I work for, and this will be the first time I will have been appointed. I have been reading through all the legal requirements etc, so any additional advice anyone can offer would be much appreciated. However, in the meantime, it states that Directors have a legal right to professional advice. Sounds silly, but what does that actually mean?

Also, it mentions obviously the return of Statutory Accounts, Annual reports, Confirmation statement and Director's report. What is the difference between these, or do Statutory Accounts, Directors report and Confirmation Statement form the Annual Report?

Thank you

 

[Deleted member 335660]

Hi, I think it is good you are taking your responsibilities seriously, many do not.

A company will obviously produce its own annual reports but others are required by law (Statutory).

I would recommend you take a look at the Institute of Directors as they have courses and books etc. You may also find there is a local branch.

My advice is be yourself, do not sign anything you are not familiar or happy with, remember you have a duty to shareholders as well employees.

 

[Lisa Thomas]

Good advice from Trevor.

I would suggest you need to know the basics in accounting and taxes. Too often I am told Directors signed the accounts without understanding what they mean.

This can come back to bite you personally, especially if the Company subsequently fails and enters an insolvency procedure.

 

[WaveJumper]

Is this a large or small company, how many other directors are there, are you being given a specific area of responsibility. However as mentioned in above posts its good to be seeking out the skills / knowledge now rather than later. Also are you being asked to offer any personally guarantees out of interest.

 

[DontAsk]

Are you sure its a company directorship and not just a job title such as "director of bog-cleaning"?

The two are VERY different.

 

[als-uk]

Thanks all, very helpful advice:

• We are a very small business, with only 2 other directors – 1 exec, 1 non-exec. We would be considered a small company
• It is a company Directorship
• No personal guarantees

Few further questions please

• What must be included in the annual reports by law please?
• What does it mean by Directors have a legal right to professional advice?

Thank you!

 

[Scalloway]

Also, it mentions obviously the return of Statutory Accounts, Annual reports, Confirmation statement and Director's report. What is the difference between these, or do Statutory Accounts, Directors report and Confirmation Statement form the Annual Report?

The requirements for the Statutory Accounts are here. Typically the company would hire an external firm of accountanyts to prepare them and submit them to Companies House. The accountants would also file the Corporation Tax Return with HMRC. You should be able to find your company's accounts on the Companies House website.

https://www.gov.uk/annual-accounts

Filing your company's confirmation statement. Somebody will already have the responsibility for this, possibly the same firm of accountants.

https://www.gov.uk/guidance/confirmation-statement-guidance

What does it mean by Directors have a legal right to professional advice

Where did you find this?

 

[Lisa Thomas]

It means Directors are entitled to take advice from a Solicitor. You are not a Director (yet) so seems a little odd in the circumstances. Can you give us more information - where does it state this - what document are you referring to

 

[als-uk]

Thanks so much again for all your answers, all really valuable – it was just stated within a book I have been reading on responsibilities of becoming a Director but doesn’t really go into much detail, so I just wanted to get a better understanding what this meant, if anything.

Just had further discussions with the CEO, it looks like he would like me to be Director in title to start with, and then in time sign a service contract. Currently, I am dubious about doing this, as I believe I may still be seen as a Director legally, with all the responsibilities etc that comes with that, despite not being formally appointed as one yet, or am I just being too risk adverse?

Sorry, probably another dense question, but where would I find a company’s Articles of Association please?

 

[DontAsk]

he would like me to be Director in title to start with, and then in time sign a service contract. please?

That sounds like a job title to me. What is the full title?

If you are a company director, you are a company director. You will have all the formal duties of a company director and be listed as one at Companies House.

A company director can have an employment contract, but they are still a director without one.

 

[als-uk]

The title is Director of Health Services. This would be a change of job title, currently employed on a full time contract

 

[Scalloway]

where would I find a company’s Articles of Association please?

There should be a copy at the company's office. You may also be able to find what was filed with Companies House.

https://www.gov.uk/get-information-about-a-company

 

[WaveJumper]

I assume you did have a look here and the links:
https://www.gov.uk/guidance/being-a-company-director

 

[DontAsk]

The title is Director of Health Services. This would be a change of job title, currently employed on a full time contract

That's just a job title. Anyone can call themselves director but it doesn't make them a company director.

 

[WaveJumper]

Have to say I agree with @DontAsk its just a job title, The last company I worked for had more directors than I think I had hot dinners but none of them were company directors

 

[als-uk]

Thanks for helping further. I had read that you could be seen as a De Facto Director?

A de facto director (meaning a director in fact or in reality) is someone who has not been properly appointed and notified to Companies House as a director but who nevertheless acts as a director and holds themselves out to third parties as a director. Sometimes (but not always) they will have the word ‘director’ as part of a job title.

The de facto director will usually carry out all the duties of a director and can make the decisions of a director, sign company documents and be treated as a director by de jure directors. It is the role assumed by the individual, rather than the title used that determines whether an individual is a director or not.

 

[DontAsk]

Easier to just give the link so we can read the full text https://www.iod.com/news/news/articles/De-facto-directors-and-their-liabilities

You are still not a company director.

 

[als-uk]

Thanks for sharing. I understand I would not be a company director.

The article states "Avoid job titles that include the word ‘director’ or imply someone is a director if they are not". So, surely, a job title with Director in should be avoided unless you are a company director?

 

[Scalloway]

The title "Director" implies status. Which sounds better?

Director of Operations
Head of Operations
Operations Manager

 

[WaveJumper]

The title "Director" implies status. Which sounds better?

Director of Operations
Head of Operations
Operations Manager

I remember being called to a boardroom meeting once and asked if I minded having my title changed, well General Manager seemed to fit as I generally did everything anyway as long as I still got payed

 

[als-uk]

So as I see it, I am perhaps better off avoiding using the title of Director, and my thinking was to use the word "Head" to avoid being seen as De Facto, at least until such point as I am appointed as a company Director?

 

[Scalloway]

If that sits better with you then I would go with it.

 

[The Resolver]

One last piece of advice. If they plan to register you as a Director of the company, ie a member of the Board, then the risks in law that flow from that responsibility should never be taken on board if you are not to be also given shares in the company . Why take the risk if, as a non-shareholder, you can never benefit from share income (dividends) and share value growth.

To clarify my comment on risk. since your duties in law require you to check out for these sort of activities. you can be liable for breaches by the other directors , eg false accounting, even if you did not know what they were doing.