Becoming a Company Director? Don't Get Caught Out by Your Legal Responsibilities

The new identity verification requirement

Since March 2024, Companies House requires all new directors to verify their identity before taking up their position. This is not just another box to tick. It is a fundamental change designed to crack down on the epidemic of company fraud that has plagued the UK business register.

The verification process confirms you are who you say you are, protecting both you and the public from identity theft and fraudulent company registrations. If you are forming a company or becoming a director, you will need to complete this verification through Companies House, an Authorised Corporate Service Provider (ACSP), or certain regulated professionals like solicitors and banks.

The real cost of director identity theft

The importance of identity verification becomes clear when you hear stories like Andrew Goodman's. In 2023, Which? magazine reported on this ordinary man who discovered he had been fraudulently listed as a director of over 100 fake companies without his knowledge or consent.

The impact was devastating. His credit rating was damaged, he faced potential legal issues from companies he knew nothing about, and it took months of effort to clean up the mess. Criminals had simply used his personal details scraped from public sources to create shell companies for money laundering and fraud.

Andrew's case is far from unique. The National Crime Agency reported a 300 percent increase in identity fraud linked to company registration between 2021 and 2023. Companies House responded by striking off more than 500,000 potentially fraudulent companies from the register. The new verification requirements are designed to stop this happening to you.

• Over 500,000 fraudulent companies struck off the register
• 300 percent increase in identity fraud for company registration
• Victims face damaged credit scores and legal complications
• Cleanup can take months of persistent effort

What the verification process involves

The good news is that verification is straightforward for legitimate directors. You request a personal code from Companies House, which requires proving your identity with valid ID and proof of address. The code is then used when filing your appointment as director.

You can verify your identity in several ways. The Companies House online service is the most direct route. Alternatively, an ACSP like K&R Accountants can verify you as part of the company formation process. Some banks and solicitors also offer verification services.

• Request personal code from Companies House
• Provide valid photo ID and proof of address
• Verification through ACSP or online service
• One-time process covers all future directorships

Your legal responsibilities as a director

Identity verification is just the start. As a director, you take on significant legal obligations that affect your personal liability and could result in fines, disqualification, or even prosecution if you get them wrong. Understanding these duties from day one helps you avoid costly mistakes.

Company law compliance

Directors must ensure the company meets its statutory filing obligations. This means submitting an annual confirmation statement, filing accounts within nine months of your financial year end, and notifying Companies House of any changes to company details within 14 days.

You must also maintain proper company records including registers of members, directors, and people with significant control. Minutes of board meetings and resolutions need recording and storing. Many Stoke-on-Trent businesses rely on their accountant to manage these requirements alongside their accounts.

• Annual confirmation statement due every 12 months
• Accounts filed within 9 months of year end
• Changes notified within 14 days
• Statutory registers maintained and updated

Tax obligations

Your company must register for Corporation Tax within three months of starting to trade. Annual Corporation Tax returns are due 12 months after your accounting period, with payment due nine months and one day after the period ends. Getting these deadlines wrong triggers automatic penalties.

If you employ anyone, including yourself through PAYE, you need to register as an employer and operate Real Time Information reporting. VAT registration becomes mandatory once turnover exceeds GBP 90,000. Many directors in Staffordshire are caught out by these thresholds.

• Register for Corporation Tax within 3 months of trading
• CT returns due 12 months after accounting period
• Payment due 9 months and 1 day after period end
• VAT registration when turnover exceeds GBP 90,000

Fiduciary duties

The Companies Act 2006 sets out seven general duties that every director must follow. You must act within your powers as defined by the company constitution. You must promote the success of the company for the benefit of its members. You must exercise independent judgment and reasonable care, skill and diligence.

You must also avoid conflicts of interest, not accept benefits from third parties, and declare any interest in proposed transactions. Breaching these duties can make you personally liable for any losses the company suffers as a result.

Financial responsibility and personal liability

While limited liability protects shareholders, directors can become personally liable in several circumstances. Trading while insolvent, known as wrongful trading, can make you liable for company debts. Fraudulent trading, where you knew the company could not pay its debts, can result in criminal prosecution.

Personal guarantees given to banks or landlords bypass limited liability entirely. Many directors sign these without fully understanding they are putting their personal assets at risk. Before signing any guarantee, consider the implications carefully.

The consequences of non-compliance

HMRC and Companies House take director obligations seriously. Fines for late filing start at GBP 150 and can reach GBP 1,500 or more for persistent failures. Repeated non-compliance can result in director disqualification for up to 15 years.

In serious cases, directors face criminal prosecution. Tax evasion, fraudulent trading, and breach of fiduciary duties can all result in criminal charges. The Insolvency Service actively investigates director conduct and publishes disqualification decisions publicly.

• Fines up to GBP 5,000 per offence for serious breaches
• Director disqualification for up to 15 years
• Personal liability for company debts in certain circumstances
• Criminal prosecution for fraud or tax evasion

How K&R Accountants can help

As an ACSP, we can handle your identity verification as part of company formation. We register new companies, set up Corporation Tax, PAYE and VAT registrations, and ensure you start on the right footing. Our ongoing compliance support means you never miss a deadline or filing requirement.

We help directors across Stoke-on-Trent and Staffordshire understand their obligations and build systems that keep them compliant. From bookkeeping to tax planning, our ACCA-regulated team provides the support growing businesses need.

• ACSP identity verification for directors
• Company formation and registration services
• Corporation Tax and PAYE setup
• Ongoing compliance monitoring and support
• Director duty guidance and training

Key takeaways

• Complete identity verification before taking up directorship
• Register for Corporation Tax within 3 months of trading
• File accounts within 9 months of your year end
• Notify Companies House of changes within 14 days
• Understand your fiduciary duties to avoid personal liability
• Never trade while insolvent or unable to pay debts
• Get professional advice from day one to avoid costly mistakes

How we can help you

We specialise in:

• Company formation and registration
• Director identity verification (ACSP)
• Corporation Tax registration and returns
• PAYE and payroll setup
• Ongoing compliance support

If you are considering forming a company or have recently become a director, contact K&R Accountants on 01782 499140 or email admin@kraccountants.com for expert guidance.