In accordance with Companies Act 2006, a private company must have at least one director, who must be a natural person, at all times. The Companies Act does not state a maximum number of directors a company may have, however a company may choose to state a minimum or maximum number in their articles of association.
UK companies are currently able to appoint corporate entities as an additional director; however the Small Business, Enterprise and Employment Act 2015 (SBEEA) will amend the Companies Act and require that all directors be natural persons. This change will come into effect in the final quarter of 2016. Existing companies with corporate directors in place in the final quarter of 2016 will have one year after the amendment comes into force to remove and/or replace any corporate directors currently in place, i.e. quarter 4 of 2017.
An individual may not act as director of a company if any of the following apply:
- The person is younger than 16 years of age;
- The person is an undischarged bankrupt;
- A moratorium period under a debt relief order applies in relation to the person;
- A bankruptcy restrictions order or a debt relief restrictions order is in force in respect of the person; or
- If they appear on the Disqualified Directors Register.
An individual may be placed on the Disqualified Directors Register for a period of time if they:
- Are suspected of committing fraud;
- Knowingly traded when a company is insolvent; or
- Failed to file documents with Companies House.
There is no limitation on the number of companies an individual can act as director of, however a director must avoid situations where their interest may conflict with the interest of the company. Section 175 of the Companies Act 2006 notes that if a conflict exists, especially in relation to the exploitation of any property, information or opportunity, the director must inform the board of directors of this conflict and must not take part in the related vote in respect of the conflicting matter.
Appointing A Director
Once a company is satisfied that an individual is fit to act as director of a company, a form AP01 is submitted to Companies House. In addition to the company’s name and number, the form also lists the new director’s name, nationality, date of birth, occupation, service address and residential address (if different to the service address).
The director’s name, service address and partial date of birth (month and year only) will appear on the public record.
Consent To Act
As of 10 October 2015, the new director is no longer required to sign the form AP01. Instead, the company must now obtain consent from the individual that they are willing to act as director before signing and submitting the form AP01 to Companies House. Once submitted, Companies House send a letter to the director’s service address informing him/her that he/she has been appointed and the responsibilities associated with being a company director.
It is essential that the company obtains clear evidence from the individual that they are willing to act, the most effective way to do this is a letter signed by the director and addressed directly to the company.
Before a company appoints an individual as a director it should conclude significant due diligence on the person to ensure that he/she is able to act, in addition to separate consent from the individual to act as director of the company before submitting the form AP01 to Companies House.