Navigating the Companies Act 2006 is essential for UK limited company directors, particularly in light of reforms introduced by the Economic Crime and Corporate Transparency Act 2023 (ECCTA). The Act sets out the core legal framework governing company formation, directors’ duties, and ongoing reporting obligations.
Failure to comply can expose companies and directors to enforcement action, including fines, criminal offences, and disqualification in serious cases. Understanding these obligations is critical to avoiding costly mistakes and maintaining effective corporate governance.
Why the Companies Act 2006 Matters to UK Directors
The Companies Act 2006 is the principal statute governing UK companies. It consolidates and modernises earlier company law and establishes the legal foundations for company formation, management, accountability, and transparency.
Directors are expected to understand how the Act applies to their role, as it defines how companies must be run and how directors are held to account. The Act also codifies directors’ general duties, providing clearer standards of conduct than previously existed under common law.
Recent reforms under the Economic Crime and Corporate Transparency Act 2023 have expanded the powers of the Registrar of Companies. These changes strengthen Companies House’s role as an active gatekeeper rather than a passive record keeper. The Registrar now has enhanced authority to query filings, remove inaccurate information, require identity verification, and impose civil penalties in certain circumstances. These measures are intended to reduce economic crime and improve the reliability of the public register.
Non-compliance with the Companies Act 2006 can have serious consequences. Depending on the breach, directors may face civil claims, criminal offences, or disqualification proceedings.
Key risks include:
Civil consequences: Breaches of directors’ duties can result in claims for compensation or other remedies.
Disqualification: Persistent or serious misconduct can lead to disqualification under the Company Directors Disqualification Act 1986.
Fines and offences: Late or inaccurate filings and false statements can result in financial penalties or criminal liability.
Compliance is therefore not simply administrative; it is a central component of responsible company management.
Key Company Types Under the Act
The Companies Act 2006 recognises several company structures, each with different legal and practical implications:
Private Limited by Shares (Ltd): Members’ liability is limited to any unpaid amount on their shares. This is the most common structure for commercial businesses.
Private Limited by Guarantee: Members agree to contribute a fixed amount if the company is wound up. These companies are often used by non-profit organisations.
Unlimited Companies: Members have unlimited liability for company debts. This structure is uncommon due to the risk involved.
Public Limited Companies (PLC): Must have at least two directors and a minimum allotted share capital of £50,000, of which at least 25% must be paid up. PLCs can offer shares to the public.
Quick Comparison Table
Company Type
Liability
Minimum Directors
Share Capital Requirements
Typical Uses
Private Limited by Shares
Limited to unpaid shares
One
No statutory minimum
Commercial businesses
Private Limited by Guarantee
Limited to guarantee
One
No share capital
Non-profits, charities
Unlimited Company
Unlimited
One
No statutory minimum
Specialist structures
Public Limited Company (PLC)
Limited
Two
£50,000 minimum
Larger enterprises
Community Interest Companies (CICs) are also referenced in the Companies Act 2006, but the CIC regime itself is primarily governed by Part 2 of the Companies (Audit, Investigations and Community Enterprise) Act 2004. CICs are designed for social enterprises and are subject to restrictions such as the asset lock, ensuring profits and assets are used for community benefit.
Choosing the appropriate structure affects compliance burdens, fundraising options, and director responsibilities, making it a strategic decision as well as a legal one.
Forming a Company and the ECCTA Reforms
Incorporating a company requires submitting prescribed information to the Registrar of Companies, including a memorandum of association and articles of association. These documents establish the company’s existence and internal governance framework.
Mandatory Registration Documents
To incorporate a company, Form IN01 must be filed. This includes:
Memorandum of Association: A statement from the subscribers confirming their intention to form a company.
Articles of Association: The company’s internal rules.
Statement of Proposed Officers: Details of directors and, if applicable, a company secretary.
Statement of Capital and Initial Shareholdings (where relevant).
Statement of People with Significant Control (PSC).
Registered Office Address and Registered Email Address.
Statement of Compliance confirming legal requirements have been met.
Identity Verification Under ECCTA
The ECCTA introduces mandatory identity verification for directors and certain other roles. From 18 November 2025:
Individuals becoming directors must provide a Companies House personal code as part of their appointment filing or on incorporation.
Existing directors must provide their personal code when the company files its next confirmation statement after that date.
A company will be unable to file a confirmation statement unless all directors have met the verification requirements.
Continuing to act as a director without meeting identity verification requirements may constitute an offence.
Articles of Association and Governance Basics
The articles of association function as a company’s constitution, regulating how it is governed and how decisions are made. Companies may adopt the Model Articles provided by the Secretary of State or use bespoke articles tailored to their needs.
Some articles contain entrenched provisions, which can only be amended if specified conditions are met. In most cases, amending the articles requires a special resolution, passed by a 75% majority of shareholders.
Any amendment must be delivered to the Registrar within 15 days. Failure to do so is an offence and may result in fines, though it does not automatically invalidate the amendment itself.
Key points for directors include:
Understanding whether Model or bespoke articles apply.
Being aware of entrenched provisions.
Ensuring timely filing of amendments.
Obtaining the correct shareholder approvals.
Directors’ Duties and Responsibilities
The Companies Act 2006 codifies seven general duties owed by directors to the company (sections 171–177):
s.171: Act within powers.
s.172: Promote the success of the company for the benefit of its members as a whole, having regard to wider factors such as employees and the environment.
s.173: Exercise independent judgment.
s.174: Exercise reasonable care, skill, and diligence.
s.175: Avoid conflicts of interest.
s.176: Not accept benefits from third parties.
s.177: Declare interests in proposed transactions.
These duties are enforceable by the company. Breaches may result in civil remedies such as damages, restitution, or injunctions. In certain circumstances, particularly where insolvency law applies, directors may also face personal financial exposure under separate statutory regimes.
Understanding and applying these duties is central to lawful and effective directorship.
Maintaining Compliance: Filings, Accounts, and PSCs
UK companies must meet ongoing filing obligations to remain compliant.
Confirmation Statement: Must be filed at least once every 12 months.
Annual Accounts: Private companies must generally file within nine months of the accounting period end.
PSC Register: Companies must identify PSCs and notify Companies House of any changes within 14 days of confirming them, not merely annually.
From accounting periods beginning on or after 6 April 2025, revised size thresholds apply for micro-entities, small, and medium-sized companies. Company size is determined by meeting at least two of three criteria: turnover, balance sheet total, and number of employees.
Audit requirements depend on company size and structure. Many small companies qualify for audit exemption, subject to statutory conditions.
Maintaining accurate records and meeting deadlines is essential to avoid enforcement action.
Enforcement, Penalties, and Avoiding Pitfalls
The ECCTA has strengthened enforcement mechanisms available to the Registrar of Companies. These include powers to query information, remove inaccurate filings, impose civil penalties, and pursue offences for false statements or non-compliance.
Common compliance failures include:
Failure to register charges within 21 days, rendering them void against liquidators or creditors.
Late or missing PSC updates, which are subject to strict time limits.
Missed filing deadlines for accounts or confirmation statements.
Proactive compliance systems and regular internal reviews are the most effective way to avoid these risks.
FAQs
1. Is a company secretary mandatory for private companies?
No. Private companies are not required to appoint a company secretary unless their articles require one.
2. Can a private company reduce its share capital without a court order?
Yes. A private company may reduce its share capital using a solvency statement procedure, subject to statutory requirements.
3. Are directors personally liable if the company becomes insolvent?
Not automatically. However, personal liability may arise under insolvency legislation, such as for wrongful trading.
4. What are the identity verification requirements under ECCTA 2023?
From 18 November 2025, new directors must provide a Companies House personal code as part of their appointment filing, and existing directors must do so via the confirmation statement process.
5. When is shareholder approval required for transactions?
Approval is required for matters such as substantial property transactions with directors, loans to directors, long-term service contracts, and payments for loss of office.
6. Do micro-entities still have to file annual accounts?
Yes. Micro-entities must file accounts but benefit from simplified reporting requirements.
7. How is a disqualified director removed from the register?
Companies House updates the register following notification of a disqualification order or undertaking.
8. What happens if a charge is not registered within 21 days?
The charge becomes void against a liquidator or creditors, although the underlying debt remains valid.
9. Is there a statutory limit on the number of shares a company can allot?
No. Limits arise from the company’s articles or shareholder approvals, not statute.
10. Can the Registrar refuse a company name?
Yes. Names may be rejected if they are misleading, too similar to existing names, or contain sensitive words without approval.
11. Do dormant companies have to file a confirmation statement?
Yes. Dormant status does not remove the obligation to file a confirmation statement.
12. What are the penalties for filing misleading PSC information?
Providing false or misleading PSC information is a criminal offence and can result in fines or imprisonment.
Final Steps to Stay Compliant
To remain compliant with the Companies Act 2006 and the ECCTA, directors should carry out regular internal compliance reviews. This includes checking PSC information, monitoring identity verification status, reviewing articles of association, and tracking filing deadlines.
Where uncertainty exists, professional advice should be sought early. Addressing issues promptly is far less costly than responding to enforcement action later. With proper systems and awareness, directors can confidently meet their legal obligations and protect both their company and themselves.
