Ep03 - What It Really Means to Be a Director

Becoming a director brings both freedom and responsibility. In this episode, Nicola explores what it really means to be the director of a Limited company in the UK. She explains the legal duties imposed by the Companies Act, the accountability to shareholders and stakeholders, and the personal mindset shift needed when you move from sole trader to company director. 

You’ll hear how directors must keep proper records, avoid conflicts of interest, and act in the company’s best interests. Nicola also shares ways to build confidence in your new role, from understanding your reporting obligations to seeking professional support. 

If stepping into a director’s position feels daunting, this conversation will set you at ease.

What You’ll Learn:

• The core legal and ethical duties of a UK company director.
• The difference between being an employee and being a director.
•  Mindset shifts and practical steps to embrace your new role.

Resources & Links:

I’ve written a book that expands on the topics in this podcast and comes with a companion guide. Learn more at www.thenumbersquarter.co.uk/book.

About the Podcast:

The Balanced Business – The Director’s Handbook is a 12‑part podcast series hosted by Bedford‑based Chartered Accountant Nicola Hageman. Designed for UK small business owners and company directors, the podcast explains how to run a Limited company with more clarity, confidence, and control. Each episode covers a practical topic – from choosing your business structure and staying compliant with HMRC to budgeting, VAT, systems, and delegating. The series is based on Nicola’s book and companion guide, available at www.thenumbersquarter.co.uk/book.

About Nicola and The Numbers Quarter:

Nicola Hageman is the founder of The Numbers Quarter, a friendly and approachable accountancy practice based in Bedford. She specialises in helping owner‑managed businesses grow their profits, plan for the future, and reduce stress. Nicola is known for her plain‑speaking advice and passion for aligning personal and business goals.

Connect with Nicola:

• Instagram – www.instagram.com/nicola_hageman
• LinkedIn – www.linkedin.com/in/nicolahageman
• Website – www.thenumbersquarter.co.uk

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Transcript

0:03

Hello again and welcome back to the Balanced Business Podcast. I'm Nicola Hageman from the Numbers Quarter, and this is episode three of the Director's Handbook. So far in the series, we've looked at whether going limited is right for you, and we've gone through how to set up your company in the right way. But today we're digging into something that's often overlooked, and that's what it actually means to be a director. Because when you are registered as a limited company, you are not just ticking a box and getting a shiny new company name. You are taking on a legal role with real responsibilities, and it's so important to understand that from the start. So this episode is all about helping you understand what's expected of you as a director in a way that's straightforward, practical, and hopefully not too intimidating. I want you to feel confident stepping into this role because the more you understand it, the more in control you will feel. First things first. You are the director. Now, for a lot of small business owners, especially if you're a one person business, being a director doesn't feel all that different to being just a business owner. You are already making all the decisions, right? But in legal terms, it is different. Once you register as a limited company and you list yourself as a director, you are agreeing to take on certain legal duties. These are things that you are expected to do or to make sure that are being done on behalf of the company. Now, you can't just ignore these responsibilities or say, well, I don't know. As a director, you are personally accountable for making sure that the company plays by the rules. This might sound a bit heavy, but it's not about being perfect or never making a mistake. It's about being aware, being proactive, and knowing when to ask for help. So the seven legal duties of a director, and yes, there are seven, but don't worry, I'm not gonna read them to you like a textbook But I do want to walk through what they mean in plain English, because this is where most people zone out and miss the important bits. So first, you've got to act within your powers. Now this means that you have to follow the rules that are set out in the company's articles of association. Basically, this is its internal rule book. Now if you are using the standard template, which most small businesses do, this isn't anything scary, but it does mean that you can't just do whatever you feel like whenever you feel like doing it. So if the articles say that decisions need to be agreed by shareholders, or that you can't just issue new shares whenever you want, you've gotta respect that. It's about working within the boundaries that have been set for the company. Okay. Number two, you've got to promote the success of the company. And this one's a big one, and it's actually a really empowering one. You are expected to run the company in a way that benefits its members. Now, usually that's you and any other shareholders, but you also have to think about long-term consequences of your decisions, how you treat employees and suppliers, and your impact on the environment and the community. It's not just about short-term profits, it's about acting in the best interest of the company as a whole in a well-rounded and responsible way. Number three, exercise independent judgment. Now this is about thinking for yourself and making your own decisions. Even if you've got advisors or business partners, and even if they're more experienced than you, you can't just hand over responsibility and say, well, they told me to do it. You can absolutely take advice and you should, but the final decision rests with you. You are responsible for the choices that the company makes, and that means you need to be informed, not just passive. Number four, exercise, reasonable care, skill and diligence. Now, this sounds obvious, but it is important. You don't need to be a genius or an expert in every area of your business, but you do need to do your job as director competently. This means turning up, paying attention, keeping records, and asking questions when something doesn't make sense. The law expects you to act with a level of care and skill that could reasonably be expected of someone in your position. That's it, but that's not nothing. Number five, avoid conflicts of interest. This one's about making sure that you're not putting your own personal gain ahead of the company's best interests. So let's say you are offered a side deal from a supplier that benefits you personally, or you've got a financial interest in a business that your company is thinking about working with. You can't just ignore that. You need to be upfront about it and act carefully to avoid any conflict. Transparency is key here. If there's any overlap between your personal life and your company's decisions, you should declare it. Number six, not accepting benefits from third parties. Now, this ties in with the last one. You shouldn't be taking gifts, money, or favors from anyone who might be trying to influence your decisions as a director. Now, we are not talking about a coffee or a thank you card, but anything substantial, anything that could sway you, needs to be refused or declared. Again, it's about acting with integrity. Number seven, declare interests in proposed transactions. And finally, if you're personally involved in a transaction that the company is entering into, say for example, you're about to rent office space from a relative, you have to make that known. The other shareholders or directors need to know if you've got skin in the game. It's not about avoiding or related transactions, but it is about making sure that everyone is aware and things are done fairly. You are responsible for filing and records as well. So alongside these duties as a director, you are also legally responsible for making sure that the company keeps up with its admin. That includes filing your annual accounts with company's house, submitting a confirmation statement. Making sure your corporation tax return is submitted to HMRC. Registering for taxes as appropriate, so VAT or PAYE. Keeping accurate company records like share registers, decision making resolutions and director's info. Now, you don't have to do it all yourself. You can hire an accountant or use. Software, but you're still the one that's on the hook if it doesn't happen. And it's worth knowing if you don't file accounts or your tax returns on time, the fines aren't small, and if you repeatedly ignore your responsibilities, you could be struck off as a director. So this stuff really matters. Okay, director versus shareholder. So what is the difference? And this is something that confuses a lot of people, especially when you are both. So the director is the one running the company, making decisions, ensuring compliance, dealing with HMRC. The shareholder is the owner. They are entitled to a share of the profits and a say in major decisions like selling the company or changing its structure. Now, in small businesses, you're probably wearing both hats, but legally they are different roles, and that distinction becomes really important If you ever bring in another shareholder or appoint someone else as a director. So can you be held personally liable? Uh, yes. In some cases. Now, limited companies are designed to give you protection, and that's why they exist. But if you knowingly break the rules. Or act recklessly or let the company trade while insolvent, you can be held personally responsible. For example, if you're paying yourself or someone else while not paying your own taxes, you're taking dividends when the company hasn't made a profit, you are ignoring your legal filing obligations, or you are taking on a debt that you know the business can't repay. If things go wrong and you've acted negligently or dishonestly, that limited liability protection can disappear. But again, this isn't about scaring you. It's about making you aware if you run your business sensibly, seek advice when it's needed, and keep your records in order. You are doing your job as a director, So keep everything documented. Good decisions are great. Documented decisions are even better, even if it's just you running the business. It's good practice to keep a record of important decisions that you make, like approving dividends, taking out a loan, changing your salary, or agreeing a big expense. These don't need to be fancy. It's just a dated document or a meeting note that shows what was agreed and why.. It gives you a paper trail, protects you legally, and makes everything easier to understand if someone else ever comes along into the business or looks at your records. So what if you don't know what you're doing? And honestly, that's fine. Most people don't when they start. You're not expected to have all the answers on day one, but you are expected to take the role seriously and seek support when you need it. That might mean working with an accountant. It might mean using a good bookkeeping software. It might mean sitting down once a month, reviewing your business numbers so that you know what's going on. You don't have to do it all, but you do need to be involved. So my final thoughts, being a director isn't about perfection. It's about responsibility. You don't need to know everything, but you do need to care. You need to understand the basics, know where the risks are, and be willing to get help when you need it. And the brilliant thing is once you've started treating yourself as a director of a real business, you become that person. You make better decisions, you feel more confident, and your business starts to grow in a more intentional way. You've got this, and I'm here every step of the way. So thank you for joining me on today's episode of The Balanced Business Podcast. I hope it's helped you feel more confident about what being a director really involves and how to step into that role with clarity and confidence. Next time we're gonna talk about money, specifically, how to separate your company's money from your own and why that's one of the biggest mindset shifts that you need to make as a limited company director. I'm Nicola Hageman from the Numbers Quarter, and I'll see you in episode four.