Are you a Director of a Company? Did you know that any business decisions you make must comply with the Companies Act and your Company’s Articles of Association? Most directors know this in theory, but few take the steps to ensure compliance. If decisions aren’t made and recorded properly it is qualified as an offence and penalties can be imposed. The future value and possible sale of your business could also be jeopardised.
These are my top five tips, which I share with my clients – to ensure compliance:
TIP 1: Record Board Minutes detailing key decisions
Minutes evidence that correct procedures were followed, the underlying reasoning behind the decision and the benefit to the Company. Minutes should be kept with the Company’s Statutory books for at least 10 years.
Implementation tip: your minutes need only be a page long. Use headings like: date, attendees, apologies, subject matter of meeting, notes of points discussed, the conclusion of the meeting and any action points to be taken.
TIP 2: Be familiar with your Company’s Articles of Association
Articles should be up-to-date and relevant to your Company and current Share Structure. They govern how decisions must be made in certain circumstances - for example when allotting shares, shareholder approval may be required.
Implementation tip: if you haven’t read your AoA in a while, ask your accountant for a copy, if you are a small business they should have one.
TIP 3: Have the requisite number of Directors appointed and ensure quorum is met when making decisions
If not then the decision becomes invalid.
TIP 4: Ensure that you do not have a conflict of interest
If there is a conflict, the relevant authority from Shareholders will need to be obtained.
Implementation tip: ensure that any conflict of interest matters are noted in the minutes of meetings where these were formally raised and noted.
TIP 5: Complete any filing for Companies House within the deadline
The deadline for your Annual Return is different to your financial and tax year returns. Check Gov.UK for more information – but generally your deadline is one year after your year of incorporation or a year from the date of your last annual return. You can file your return up to 28 days after the due date – but good practice is to submit it within 15 days of receiving the notification from Companies House.
I hope those quick tips have helped to be clear on your duties as a director with regards to your decision making process. If you would like to discuss these or your other duties as a Director, please feel free to contact me by email, or give me a call on 01604 828 282.