Directors' Responsibilities

1. Appointing Directors

Every private limited company must have at least one company director. Since 1 October 2008, at least one of the directors must be an actual person (as opposed to another company).

1.1 The first directors (though there may be only one of them) are appointed by the shareholders who form the company.

• Directors are often also shareholders or employees of the company, but do not have to be.

1.2 Subsequent appointments must follow procedures set out in the Articles of Association. Usually, the board can appoint a new director (subject to any maximum number set in the Articles), or the shareholders can appoint a person who has either been recommended by the board, or who has been proposed as a director in advance.

1.3 If you are a director but have no executive position within the company, you will be classed as a non-executive.

• As a non-executive director, you may have nothing to do with the day-to-day running of the company. Even so, you will still carry the same responsibilities as other directors.

1.4 Even if you have never been appointed a director, you could be classed as a shadow director (if the other directors are 'accustomed to act' under your instructions) or as a 'de facto' director if you act as if you were one - for example, if you resign your directorship but continue making decisions as a director.

• As a shadow director or de facto director you carry many of the legal responsibilities, and are subject to many of the penalties, of other directors.

1.5 Some people are debarred from becoming directors.

• Auditors may not be appointed directors of the companies for which they act.
• People who have been disqualified (see 6.3) may not be appointed.
• Undischarged bankrupts may not be appointed unless they have first obtained leave from court.
• Since 1 October 2008, directors must be aged at least 16 or over.

1.6 The appointment, departure or change of particulars of a director or directors must be reported to Companies House within 14 days, using form 288a/b/c.