Setting up a LTD company
Discussion
Morning All,
Going to setting up with 2 friends a small business venture. We have decided to set up a Ltd company with the 3 of us as equal share holders.
Quick question:
1. All of us will be directors of the company, does being a Financial Director, Managing Director or any other X Director have more of a responsibility if things go belly up ?
Cheers
IceBoy
Going to setting up with 2 friends a small business venture. We have decided to set up a Ltd company with the 3 of us as equal share holders.
Quick question:
1. All of us will be directors of the company, does being a Financial Director, Managing Director or any other X Director have more of a responsibility if things go belly up ?
Cheers
IceBoy
IceBoy said:
Morning All,
Going to setting up with 2 friends a small business venture. We have decided to set up a Ltd company with the 3 of us as equal share holders.
Quick question:
1. All of us will be directors of the company, does being a Financial Director, Managing Director or any other X Director have more of a responsibility if things go belly up ?
Cheers
IceBoy
Going to setting up with 2 friends a small business venture. We have decided to set up a Ltd company with the 3 of us as equal share holders.
Quick question:
1. All of us will be directors of the company, does being a Financial Director, Managing Director or any other X Director have more of a responsibility if things go belly up ?
Cheers
IceBoy
If things go 'belly up' and it was found that the directors continued trading while knowing the company to be insolvent then potentially all the directors are personally liable for any debts incurred during this period. It is a joint responsibility and your actual job title is I believe not relevant.
Saying that I seem to recall that if you have specialist knowledge, say you a qualified accountant serving as the Finance director, then what you could be reasonable be assumed to ‘know’ is greater.
That's the gist of it.
The absolute legal position is that all directors are of equal ststus in law. Howver, as Jaglover points out, some may be more equal than others or, to be more precise, may be deemed to be more culpable than others if things go wrong.
This "special treatment" is usually reserved for directors who are professionals, usually Solicitors or Accountants, as they would be expected to have superior knowledge compared to mere "lay" directors and so should be able to spot and deal with upcoming problems more effectively.
The absolute legal position is that all directors are of equal ststus in law. Howver, as Jaglover points out, some may be more equal than others or, to be more precise, may be deemed to be more culpable than others if things go wrong.
This "special treatment" is usually reserved for directors who are professionals, usually Solicitors or Accountants, as they would be expected to have superior knowledge compared to mere "lay" directors and so should be able to spot and deal with upcoming problems more effectively.
Thnks all,
Make sense.
In this instance I am merley providing a third of the capital for the start up and will hold an equal shareholding.
Maybe I could just be a shareholder. will this mkae me safer, or should I demand to be a compnay director?
What are the advantages and disadvantages.
I what to have 1/3 of the decision/vote ?!???
Make sense.
In this instance I am merley providing a third of the capital for the start up and will hold an equal shareholding.
Maybe I could just be a shareholder. will this mkae me safer, or should I demand to be a compnay director?
What are the advantages and disadvantages.
I what to have 1/3 of the decision/vote ?!???
A shareholder is an "owner" of the company. The directors are the "managers" of the company.
Shareholders are only entitled to meet and vote at General Meetings of the company. These are often held only once a year (The Annual General Meeting or AGM) and, nowadays, often not at all. Company Law now allows companies to dispense with the legal requirement to hold AGMs or EGMs (Extraordinary General Meetings). This dispensation is often built into the original Memorandum and Articles of Association.
As a shareholder, your ability to control and influence the direction of the company is limited by your shareholding. Unless you own more than 50% of the shares, there is always the possibility that the other shareholders will outvote you.
Being a director gives you a more day to day involvement in the business. If you don't want this day to day involvement, then I would suggest you don't become a director as you can then be one step removed from the responsibilities associated with directorship. However, you may not want to leave total day to day running of the company to other people.
Shareholders are only entitled to meet and vote at General Meetings of the company. These are often held only once a year (The Annual General Meeting or AGM) and, nowadays, often not at all. Company Law now allows companies to dispense with the legal requirement to hold AGMs or EGMs (Extraordinary General Meetings). This dispensation is often built into the original Memorandum and Articles of Association.
As a shareholder, your ability to control and influence the direction of the company is limited by your shareholding. Unless you own more than 50% of the shares, there is always the possibility that the other shareholders will outvote you.
Being a director gives you a more day to day involvement in the business. If you don't want this day to day involvement, then I would suggest you don't become a director as you can then be one step removed from the responsibilities associated with directorship. However, you may not want to leave total day to day running of the company to other people.
Edited by Eric Mc on Tuesday 22 August 08:56
There are some tax advantages too, if you're planning on taking a wedge in the first year. I'm not to sure how things work when there's more than one person but I've always held the opinion it's better to start out as a sole trader and progress to Ltd. Also, it's tougher to shut down a Ltd company if it were to all go wrong. Talk to a reccomended accountant as well.
There isn't one person in this case so a sole -=trader arranhement is not feasable. The alternative would be a partnership - which has its own risks and tax implications.
With a limited company set up, it is imperative that an accountant is contacted at as early a stage in the proveedings as possible - prefereably before the company even starts to trade.
With a limited company set up, it is imperative that an accountant is contacted at as early a stage in the proveedings as possible - prefereably before the company even starts to trade.
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