LEGAL
Sea change for company directors
Being a company director naturally brings with it such benefits as autonomy, decision-making power and the freedom to implement one’s vision. Increasingly, however, the role is also fraught with potential pitfalls – financial liability, accountability for others’ misconduct and ongoing responsibilities, to name but a few. Chartered accountants Newby Castleman examines the changing climate for directors and offers advice to both existing and aspiring directors on how to tread carefully, now and in the coming months.
In line with the Companies Act 2006, a director owes certain duties to his or her company, some of which – those regarding conflicts of interest and accepting benefits from third parties – continue even after the directorship has come to an end. Likewise, a director may be
found personally liable for wrongful trading if a company goes into insolvent liquidation, regardless of whether or not they have been dishonest or have since resigned. The long-term repercussions of
directorial conduct don’t end here. Failure to meet one’s responsibilities as a director can lead to
disqualification, which prevents involvement in the formation, management or promotion of a company for up to 15 years. Alongside these established
factors is the new Finance Bill 2019-20, which will take effect from 6 April this year. In essence, the bill will increase HMRC’s remit where directors are concerned – allowing it to issue notices to directors and make them personally liable for the tax liabilities of an insolvent or soon-to-be-insolvent company – while partially reinstating the government body as a preferential creditor in insolvency, for taxes held on behalf of other taxpayers.
John Griffin
‘Given the imminent changes of this year’s Finance Bill, it is imperative that a director monitors their company’s finances closely and regularly’
John Griffin, Partner at Newby
Castleman, said: “With so many risks tied to the role of company director in both the short and long term, and given the imminent changes of this year’s Finance Bill, it is imperative that a director monitors their company’s finances closely and regularly. “By establishing and maintaining
systems which demonstrate that they are aware of the potential
issues surrounding employees and customers, a director will be able to back up their claims of acting honestly and vigilantly, should they find themselves in a financially vulnerable position. “We would urge any directors
apprehensive about how best to protect their position, as well as prospective directors keen to cover all bases, to seek professional advice before 6 April 2020.”
88 business network February 2020
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