The Role of Company Directors and Owners Explained

Introduction to members and directors

Limited companies and limited liability partnerships are privately owned by individual people and/or corporate bodies. They are collectively known as 'members'. Company members are called ‘shareholders’ or ‘guarantors', depending on whether the company is limited by shares or limited by guarantee. LLP members are often referred to as 'partners'.

Limited companies also have to appoint directors to manage day-to-day business activities on behalf of their members. Some companies also choose to appoint secretaries to assist directors with their duties and responsibilities. Collectively, directors and secretaries are called ‘company officers’.

Company members and officers are often the same people, which means a company can be owned and managed by the same people. In fact, a company need only have one member and one director; therefore, it is possible for just one person to set up a limited company and run it on their own. There is no restriction to the maximum number of members and/or officers a company has during or after incorporation.

LLPs must have a minimum of two members to be set up, but there is no upper limit to the number of partners an LLP can have. There are no officers in an LLP - there are only members and ‘designated members’. All members have the same rights, but designated members are responsible for taking on statutory reporting and filing duties on behalf of the entire partnership.

Company members

Who owns a limited company?

Private limited companies are owned by one or more individuals (human or corporate) known as ‘members’. The members of limited by shares companies are called shareholders. The members of limited by guarantee companies are known as guarantors.

Who can be a company member?

Any individual person or corporate body can be a limited company shareholder or guarantor. In most cases, company members are also directors.

What are the rights and duties of company members?

The main rights and duties of company members are:

• To provide capital investment to the business.
• To appoint directors.
• To determine the rights and powers of directors.
• To make decisions in special circumstances when directors are not authorised to do so.
• To provide financial security to the company in the event of insolvency.
• To receive a percentage of business profits in relation to their shares (limited by shares companies only). Limited by guarantee companies are most often set up by non-profit businesses; therefore, guarantors do not normally take any company profits for their personal use.

The financial security provided by company members is known as ‘limited liability'. If a company is unable to meet its financial obligations, members are required to contribute a pre-determined amount of money toward their company’s debts. The financial liability of shareholders is the nominal value of their shares. The financial liability of guarantors is the sum agreed in their statements of guarantee.

What is a shareholders’ agreement?

The members of companies limited by shares usually draw up a shareholders’ agreement to outline their collective and individual rights and responsibilities. This is an effective way to avoid ambiguity and disagreement between members further down the line. Shareholders’ agreements usually include details about:

• Prescribed particulars of rights attached to shares (voting rights, dividend rights, and capital rights).
• Pre-emption rights with regards to issuing more shares or transferring existing shares.
• How and when new shares can be issued.
• How and when shares can be transferred from one shareholder to another.
• Extent of directors’ powers.
• How and when company profit is distributed.
• Procedure for the appointment and removal of company officers.
• Decision-making guidelines.
• Rights of minority shareholders.

How to add a new shareholder or guarantor

It is incredibly easy to add shareholders or guarantors during the company formation process if you register online through Quality Company Formations:

• Select ‘Add New Officer’ on the application form.
• Indicate whether you wish to appoint an individual person or a corporate body.
• Choose the position(s) the person will have - shareholder/guarantor, director, secretary.
• State the number of shares to be taken by the shareholder (if applicable).
• Enter the member’s name and authentication details.
• Add a contact address.

Repeat this process for every member you wish to add to your new company. When your company is registered, the details of all new members will be listed on the memorandum of association to signify their membership and limited liability. This information will also be displayed on public record.

If you wish to add a new member after incorporation, you must notify Companies House by filing a confirmation statement - you cannot use the same process as above. You can deliver a confirmation statement immediately or you can wait until the filing deadline. New shareholders will have to purchase one or more shares in the company, and guarantors will have to agree to a financial guarantee.

Details of all new members must be entered in the company’s statutory register as soon as possible. Companies House will update the public register after a confirmation statement is filed.

How to remove a company member

You can remove shareholders and guarantors from your company at any time after incorporation by completing a confirmation statement for Companies House.

In order to transfer the shares, you should complete a stock transfer form (J30), prepare meeting minutes, issue new share certificate(s) and update the register of members.

Company directors

What is a director?

Almost any individual person or corporate body can be the director of a limited company, including shareholders, guarantors and company secretaries. In fact, in most companies, directors are also shareholders or guarantors. However, a person may not be a company director if they are:

• Under the age of 16
• An undischarged bankrupt
• A disqualified director whose term of disqualification has not yet been spent
• The auditor of the company

What do directors do?

The main duties and responsibilities of limited company directors include:

• Using their skills and expertise to make the company a success.
• Making lawful and considered decisions only within the extent of their powers, the provisions of the articles of association, shareholders’ agreement and the Companies Act 2006.
• Ensuring the company adheres to all statutory filing and reporting requirements - preparing confirmation statements, annual accounts and tax returns; paying corporation tax and VAT; managing payroll and PAYE; notifying Companies House when company details are changed; and filing copies of resolutions.
• Maintaining accurate business and accounting records.
• Managing the company’s finances and business bank accounts.
• Appointing an accountant or auditor, if and when required.
• Alerting members to financial instability or abnormalities.
• Ensuring creditors are paid.
• Maintaining the company’s registered office address (and SAIL address, if applicable) and making statutory records available for inspection at the appropriate location.
• Avoiding conflicts of interest.

How to appoint a limited company director

To appoint a director to your company during the incorporation process, you will have to follow these simple steps:

• Select ‘Add New Officer’ on Quality Company Formations’ online application form.
• Indicate whether you are appointing a person or a corporate body.
• Choose the position(s) the person will have - director, shareholder/guarantor, secretary.
• Enter his or her name, DOB, occupation, nationality, and authentication details.
• Provide details of the director’s residential address and service address.

To appoint a new director after company incorporation, sign into your Quality Company Formations online account, follow the same steps as above and submit the information to Companies House. The public register will be updated within approximately 24 hours. The company’s statutory register of directors must be updated immediately to reflect the new appointment.

How to remove a company director

You can easily remove a director from your company after incorporation through Quality Company Formation's Client Admin Portal. Simply sign into your client account, select the relevant company officer, click ‘Edit’ and untick Director’s position and submit the information to Companies House. The termination will be updated on the public register within approximately 24 hours. The company’s statutory register of directors should also be updated to reflect the termination.

Click here to find out how to create a free client account with Quality Company Formations and start managing your company online.

Company secretaries

What is a company secretary?

A company secretary is a person or corporate body appointed by directors or members to assist directors with their day-to-day duties and responsibilities. Private limited companies are not legally required to appoint a secretary unless the articles of association state otherwise.

Who can be a company secretary?

Almost any individual person or corporate body can be a company secretary, including shareholders, guarantors and directors. However, a person may not be a company secretary if they are:

• Maintaining accurate business and accounting records.
• Preparing and filing annual accounts, confirmation statements and tax returns.
• Managing payroll and PAYE.
• Maintaining the registered office address and SAIL address and making statutory records available for public inspection at the appropriate location.
• Arranging board meetings and general meetings.
• Taking and distributing minutes of meetings.
• Monitoring the company’s financial position and accounts.
• Appointing an accountant or auditor, if and when required.
• Informing Companies House and/or HMRC when any business details are changed.
• Filing copies of resolutions with Companies House.
• Signing contracts and internal documents on behalf of the director.

How to appoint a limited company secretary

To appoint a secretary to your company during the incorporation process, follow these simple steps:

• Select ‘Add New Officer’ on Quality Company Formations’ online application form.
• Indicate whether you are appointing a person or a corporate body.
• Choose the position(s) the person will have - secretary, director, shareholder/guarantor.
• Enter his or her name, authentication details and contact address.

How to remove a limited company secretary

A company secretary can be removed at any time after incorporation through our online admin portal. Simply sign into your account, select the relevant officer, click ‘Edit’ and untick secretary’s position icon next to the name of the secretary you wish to remove and submit the information to Companies House.

Companies House will update the public register within approximately 24 hours to reflect the appointment or removal of the secretary. Your company's statutory register of secretaries should also be updated accordingly.

LLP members

What is an LLP member?

LLP members are usually known as ‘partners’. They are the joint owners and managers of limited liability partnerships. Their duties will depend on what is agreed when the business is set up, and these duties and responsibilities can be changed at any time after incorporation if all members are in agreement.

Who can be an LLP member?

Almost any person or corporate body can be an LLP member, however, a person may not be an LLP member if they are:

• Under the age of 16
• An undischarged bankrupt
• A disqualified director whose term of disqualification has not yet been spent

What do LLP members do?

LLP members are responsible for their own workload, and they receive profits in relation to how much of the business they own and control. This is usually determined by the amount of money and time they contribute to the business, the details of which will be outlined in a partnership agreement.

What are designated members?

Designated LLP members are partners who have been nominated to take on additional responsibilities on behalf of the entire partnership and its members. The types of duties they carry out are similar to the administrative responsibilities of company directors and secretaries, including:

• Maintaining business and accounting records.
• Filing partnership accounts and confirmation statements.
• Ensuring all members complete their Self-Assessment tax returns and pay their Income Tax and NICs by the statutory deadlines.
• Monitoring the LLP’s financial position and accounts.
• Managing the LLP’s business bank account.
• Ensuring all suppliers and service providers are paid.
• Appointing an accountant or auditor, if and when required.
• Reporting changes to Companies House and HMRC.
• Maintaining the registered office address and SAIL address and making statutory records available for public inspection at the appropriate location.
• Overseeing the dissolution of the LLP if the business is to be wound up.

At least two LLP members must be designated during the incorporation process and at all times thereafter, but it is also possible to designate all members; however, if no two members are designated, Companies House will view all members as such.

How to add a new LLP member

To appoint a new LLP member during the incorporation process, simply follow these steps:

• Select 'Add New Officer' on Quality Company Formations' online application form.
• Indicate whether the member is a person or corporate body.
• State whether the member will be 'designated'.
• Enter his or her name, DOB, and authentication details.
• Provide details of the member's residential address and service address.

To appoint a new LLP member after incorporation, sign into your Quality Company Formations online account (or create a new account if you are not an existing customer), follow the same steps as above and submit the information to Companies House.

How to remove an LLP member

You can remove an LLP member at any time after incorporation. Simply sign into Quality Company Formations’ client admin portal, select the relevant member, click ‘Edit’ and untick the position icon next to the appropriate member’s details and submit the information to Companies House.

Companies House will update the public register within approximately 24 hours to reflect the appointment or removal of the LLP member. Your LLP’s statutory register of members should also be updated accordingly.