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Comments Off on Guide to the duties and responsibilities of directors
Who is a director?
A director is responsible for the management of a company’s affairs. If you exercise sufficient influence over a company or act as if you are a director, you may be treated as one for certain purposes, even if not formally appointed. For example, you could then be a ‘shadow’ or ‘de facto’ director, and you may acquire duties and liabilities even if you are not officially a director.
Persons under the age of 16 or any one that has been given bankruptcy status cannot become a director.
Could you be a director?
There are no mandatory qualifications to become a director, but you must be capable of performing the seven statutory duties set out by The Companies Act 2006, listed below:
1.To act within their powers. This requires a director to comply with the company’s constitution (usually the Articles of Association) and decisions made under the constitution and to exercise the powers only for the reasons for which they were given.
2.To act in a way the director considers (in good faith) is most likely to promote the success of the company for the benefit of its members as a whole (or, if relevant, other purposes specified in the constitution). In performing this duty, a director must have regard to all relevant matters, but the following are specifically identified in legislation:
a.the likely consequences of any decision in the long term;
b.the interests of the company’s employees;
c.the need to foster the company’s business relationships with suppliers, customers and others; the impact of the company’s operations on the community and the environment;
d.the desirability of the company maintaining a reputation for high standard business conduct; and the need to act fairly as between members of the company.
3.To exercise independent judgment, that is, not to allow yourself to be bent to the will of others. This does not prevent directors from relying on advice, so long as they exercise their own judgement on whether or not to follow it.
4.To exercise reasonable care, skill and diligence. This requires a director to be conscientious, careful and well informed about the company’s affairs. If a director has particular knowledge, skill or experience relevant to his function (e.g is a qualified accountant and acting as a finance director). Expectations regarding what is ‘reasonable’ will be judged accordingly.
5.To avoid conflicts (or possible conflicts) between the interests of the director and those of the company. The prohibition will not apply if the company consents (and consent meets the necessary formal requirements).
6.Not to accept benefits from third parties (i.e. a person other than the company) by reason of being a director or doing anything as director. The company may authorise acceptance (subject to its constitution), for instance to enable a director to benefit from reasonable corporate hospitality.
7.To declare any interest in a proposed transaction or arrangement. The declaration must be made before the transaction is entered into and the prohibition applies to indirect interests as well as direct interests.
In addition, a director MUST:
- consider or act in the interests of creditors (particularly in time of threatened insolvency);
- maintain confidentiality of the company’s affairs.
Duties of the company
The company itself has numerous legal duties, including those under the Companies Act itself, such as:
- maintaining full and accurate accounting records;
- making relevant filings at Companies House (including the annual accounts).
Complying with all other laws and regulations applicable to it, e.g. tax and employment laws.
As the company acts through the board of directors, the directors are responsible for ensuring compliance by the company.
In certain cases, directors are made specifically liable for a violation, for instance, in the case of accounting records, every officer of the company is liable to a fine, imprisonment or both.
Directors as employees
A director may also be an employee of the company, typically referred to as an executive director. The general duties of directors, as outlined above, apply equally to executive directors, but an executive director will also be bound by the terms of their employment contract.
What are the consequences of breach?
The general duties outlined above are owed by the director to the company, and only the company, or in limited circumstances, the shareholders, will be able to enforce them as such.
Remedies available for breach of these duties include injunctions (to prevent further breach), setting aside a conflicted transaction, restoration of company property held by the director and damages.
A breach may also be grounds for termination of an executive director’s service contract.
A few examples of circumstances where a director may be personally liable for acting as a director, include:
- under the Insolvency Act, a director may be personally liable for wrongful or fraudulent trading in the context of insolvency of the company, generally where a director allows the company to take on a debt or commitment, by buying goods or services on credit, that they know is unlikely to be paid;
- the board and each director has responsibilities under the Health and Safety at Work Act, breach of which may result in criminal sanctions on a director
- a director may be liable for failure by the company to make required filings at Companies House.
Can a director be relieved of liability?
A director of a company cannot be exempted from liability in connection with any negligence, default, breach of duty or breach of trust in relation to the company. A director cannot be indemnified by the company against those liabilities unless the indemnity meets specific statutory criteria. The prohibition does not prevent a company from providing ‘Directors and Officers’ (D&O) insurance for directors, but this does not exonerate them from their obligations.
A company may generally ratify acts carried out by a director in breach of duty. Appropriate procedures need to be followed for ratification and not all acts can be ratified (for instance, fraudulent acts of the director). A court may relieve a director if it considers that the director has acted both honestly and reasonably and that he ought fairly to be excused.
Points to note
This guide is a just a brief overview of the key general duties of directors of limited liability companies under the Companies Act 2006.
A director may have numerous other responsibilities in relation to a company, such as arrangements between the director and the company, financial reporting and accounting, share issues and winding up. Additional requirements will apply to listed companies or companies traded on a regulated market.
Comments Off on Proud to have helped increase turnover for 2 Cornish businesses
SouthWestfd, a team of consultant finance directors, are helping to nurture financial growth in Cornwall. Two companies that have experienced that growth are Mackerel Sky Events and Radix Communications.
Claire Eason Bassett, Managing Director of Mackerel Sky, a Creative Events Agency, heads a team of 12 with 3 offices spread across the south of England. Mackerel Sky started out with a traditional management structure and a small team of 5.
Back then Claire felt isolated as a director, she felt there was no one she could delegate to or turn to for advice. She added ‘I was at the point of my capacity’. This is when she reached out for help. ‘That’s where SouthWestfd came in. In particular, Jeremy Kirk, who has now been working with us for 5 years’.
Claire adds ‘We have a great working relationship, which is crucial to delivering the stuff that we do. Jeremy is core to that. What we needed was that strategic knowledge, and an accurate view of our finances, so we could get a grip on them and make proper decisions … It wasn’t as good as it could be and that’s where Jeremy came in and helped us deliver’.
Jeremy not only helps Mackerel Sky to deliver the right choices he is also able to understand the challenges they face and the opportunities that exist for them.
Claire says ‘He is always supportive, always challenging, throws in a curve ball as and when, and that’s part of the brilliance of having that external input. Seeing where there is an opportunity’.
As a result of SouthWestfd’s support, Mackerel Sky are now showing a 10% profit.
‘Impact of that kind is huge and worth much more to us as a business than the rate we pay for Jeremy’s input’. Claire adds.
Fiona Campbell-Howes, founder of Radix Communications has found the support of SouthWestfd invaluable in helping her copywriting agency’s profits grow. She says ‘I would recommend SouthWestfd to anyone that needs financial support.’
Fiona approached SouthWestfd in 2013. She says ‘… work kind of fell off a cliff… it was then we decided to get in some professional experience so it didn’t happen again, that’s when we got in touch with SouthWestfd and Jeremy started working with us.’
Jeremy initially worked with Radix intensively. Now, his work with Radix is based around a monthly finance meeting with the management team..
In 2013, Radix’s turnover was £300,000, increasing to £400,000 in 2014, their current forecast for 2015 is an impressive £580,000.
Fiona credits much of that significant growth to working with Jeremy. She adds ‘We would never have been able to afford to take on a full time Financial Director with the kind of experience Jeremy has.’ SouthWestfd can provide FD help from as little as one day a month.
‘SouthWestfd have just brought us so much value, not just in turnover growth, Jeremy makes us focus on profitability’.
Radix and Mackerel Sky directors have experienced the personal and corporate benefit of reaching out to SouthWestfd in terms of both personal support and growth in corporate value.
Fiona adds ‘…he has paid for himself over and over again. I would recommend him to any business with no financial or business management experience’.
Watch these case study videos and find out more from Claire and Fiona.
SouthWestfd focus on helping you and your business grow. We will not only support you on your financial journey, we are there every step of the way.
Comments Off on ‘Understanding Your Accounts’ Part 3 – The future is in your hands!
In this series of blogs ‘Understanding your accounts’, we’ve looked at whether your accounting numbers can be useful beyond mere compliance with tax and company filing rules. We’ve also reviewed a simple example of how a balance sheet works, and identified a couple of areas to help you manage your business.
In this final blog we build on these to see what ‘hidden data’ is in your accounts and how to turn it into management information to aid your decision-making in growing your business.
Consider the following questions:
- Do you categorise your sales income….. by product; geographical area; market sector; sales location? It may be a combination – but can you easily identify and allocate your sales into segments that are useful to you?
- Similarly, can you do the same for your costs….. raw materials, labour, distribution and other costs, to see segmented profitability?
- How long does each of your customers / clients take to pay you?
- How long do you have to pay your suppliers after they have delivered to you?
- Do you know when during the month / year you will come close to your last £1 in the bank?
- Do you know how much your business will be worth at the end of the year?
‘Why should I look at this level of detail?’
Being able to identify the detail will help you understand the true ‘cost and value drivers’ within your business and help you to take decisions about the future.
Have a look at:
- How profitable each product / area / sector / location is – including the timing of cashflows;
- Seeing if you covering your business overheads – and if all products / areas / sectors / sales locations are contributing at the same level;
- What action you may need to take now to mitigate a pinch on cash in the future.
Having a report at least once a month that identifies all of the above (+ more!), is an excellent tool to see where you have been, and more importantly to use it to see where you are going!
‘But how do I predict the future?’
You can’t of course. The usual investment disclaimer ‘the past is no guarantee for the future’ is true, but it is a good enough place to start with preparing forecasts. You know your business well and if you have a good understanding of the data described above, you can use it to estimate how each future month is most likely to turn out.
By focusing on the underlying detail, your forecasts will be much more tailored and predictable than sticking a ‘finger in the air’ to guess your sales and profitability. More importantly you will be able to identify and better understand the reasons why you exceeded, or missed your forecast.
Developing this critical skill will enable you to feel more confident in taking informed decisions to minimise poor future performance and to focus on maximising the right activities to grow your business.
Blog by Richard Colling SouthWestfd, Associate Director at SouthWestfd
Comments Off on SouthWestfd Director named as one of UK’s Top 50 advisers
Jerry Davison, Managing Director of SouthWestfd, has been named as one Britain’s top 50 business advisers.
Jerry, who offers business advice to help entrepreneurs, was picked from hundreds of advisers from around the UK for his work with growth businesses and start-ups.
Jerry who runs www.millconsultancy.co.uk, www.finance-department.co.uk and www.southwestfd.co.uk, said: “It’s all too easy for an early stage business to get distracted and lose sight of what’s important to its founders and what they’re trying to achieve – there’s a strong risk that without good strategic advice you can wake up one day with a business that doesn’t bring you pleasure and you resent. And what’s worse, because you arrived there through a series of a hundred small compromises over several months, you didn’t see it coming.
“Good advice can help you put simple systems and practices in place to make sure that the business stays on track and does what you wanted it to, and hoped it would.”
Jerry has over twenty years of experience as a consultant and business adviser and has recently mentored Crowdcube, setting the Exeter-based crowd sourcing firm on a clear path towards future growth
The awards are run by small business network Enterprise Nation, which asked fledgling businesses to nominate an adviser that had helped them to build and grow a sustainable business.
The awards, which set out to highlight the work done behind the scenes by experts helping Britain’s army of small businesses to build and grow, revealed a rich vein of dedicated supporters for the UK’s expanding entrepreneurial culture.
Emma Jones, founder of Enterprise Nation said: “These business advisers are the unsung heroes behind Britain’s booming small business culture.
“The awards have uncovered some incredible work that has helped fledgling firms take steps towards sustainability and growth by taking a strategic look at their business.
“Research shows that those firms that take advice do better than those that don’t – and it stands to reason that good advice can help avoid some of the damaging, early mistakes entrepreneurs can make that can often force them to give up.
“Thanks to the Government’s £30m Growth Voucher initiative, there is now an increasing interest in taking strategic advice to overcome some of these behavioural barriers and unlock growth potential.
“The awards were designed to show this important work in action, in order to help more start-ups and small firms find out about the benefits of taking advice.”
The 50 advisers were chosen from hundreds of entries from around the UK, with ten outstanding experts picked out as the top ten.
Jerry’s top tips for growing a business are:
- Question everything you’re told
- Ask others you know who’ve started up what they wish they’d asked for with hindsight – if you don’t know any, book yourself onto free business networking events (Eventbrite is a good place to find some)
- Make sure you actually get around to running your business and don’t spend all your time talking about it
A Government report entitled Growing Your Business, written by Enterprise Adviser Lord Young suggested if Britain’s smallest firms were to take on just one more employee each, it would eradicate unemployment in the UK.
He said: “The evidence is unequivocal: businesses that seek and engage external help are more likely to grow. But much more needs to be done to encourage firms to invest in their capability.”
A report from the Royal Society for the encouragement of Arts, Manufactures and Commerce suggested by 2018 there would be more than five million people working for themselves in this country – exceeding the number working in the public sector for the first time.
Entries were judged by a distinguished panel including Emma Jones, and representatives from professional bodies including the ICAEW, as well as the Department for Business, Industry and Skills, StartUp Loans and James Layfield, the founder and entrepreneur behind Central Working.
To see the full list of the Top 50 advisers visit https://marketplace.enterprisenation.com/top-50-advisers
Use your Growth Voucher with SouthWestfd and you can benefit from top advice. Not applied for a voucher yet – apply now.
Comments Off on What can be done to help improve the UK’s skills shortage?
In 2014, figures released by the Office for National Statistics showed signs that the UK economy was finally in recovery, with the strongest rates of growth reported since 2007. Whilst this is undoubtedly excellent news for UK businesses, there is now a more worrying issue at hand – lack of skills. Research carried out by the UK Commission for Employment (UKCES) shows as many as 1 in 5 job vacancies are left unfilled due to shortages in skills.
Kevin Green, chief executive of the Recruitment and Employment Confederation (REC), whose members are “on the front line of the UK labour market” as he puts it, paints an alarming picture.
“Last year we had nine areas of skills shortages, now we have 43 areas. Every single type of engineering is in short supply, from mechanical to software, civil to electrical,” says Mr Green.
“In IT, coders, programmers, developers are all in short supply; there’s a shortage of doctors and nurses in the National Health Service; and we need about 20,000 more teachers in the UK.
“And the situation’s been getting worse month-on-month over the last 18 months,” he adds.
UKCES found that many businesses were unwilling to take on school and college leavers, although those that did found they were largely well prepared for employment. Perhaps those looking for their first job should not be so readily dismissed without proper consideration as they may prove to become a good and cost effective resource. More apprenticeships and ‘earn-as-you-learn’ schemes would also help to tackle the issue, equipping school leavers with the skills that they may currently be lacking. And with a greater input by employers into the content of these courses, would mean a quicker and more relevant integration into the workplace.
Although educational institutions must play their part in helping with the crisis by providing better careers advice, businesses can also help employees who lack certain skills by providing regular access to training.
As things stand, the future looks uncertain and if the skills shortage crisis gets any worse, the recent growth of the UK economy could suffer. It is essential that the government works with educational institutes and employers to ensure future generations can go into the job market equipped with all the skills necessary for the UK economy to continue to grow.
Source: Skills shortages holding back the UK’s economic recovery, BBC News December 2014, UKCES and ONS.
Comments Off on Can’t get a business loan? Here’s some alternatives.
Do you operate a small business, and have you ever tried securing a bank loan to grow? If so, you will relate with some of the issues small business owners can face when approaching banks.
With the number of hoops you’re expected to jump through, it’s little wonder that businesses are looking at alternative financing mechanisms. Some seek financial security through small business loans via other businesses; whilst others, especially start-ups, look at peddling their wares via crowd-funding solutions such as Crowdcube.
Does bank finance just appear hard to achieve?
Some things in life appear harder than they are. Securing a loan from a bank isn’t one of them. The Bank of England’s Trends for Lending (October 2014) report highlighted this. Lending to small and medium enterprises (SMEs) continued its negative trend over the last several quarters, identifying one of the significant reasons being larger businesses had access to more lending facilities.
It’s not just the Bank of England who has observed the lack of lending. The Federation of Small Businesses’ (FSB) Credit Condition Survey (October 2014) found half of small business owners thought credit availability was ‘poor’ or ‘very poor’ and that credit was unaffordable.
In fact, the Small Finance Monitor found 78% of the 5,000 businesses they interviewed hadn’t sought external borrowing. The SME sector is seeing growth, despite big banks’ reluctance or reticence to lend to them. Over half of SMEs interviewed by the Small Finance Monitor are planning on 2015 expansion, and 14% are also seeking to borrow finance.
There are many alternative to bank lending
It’s not just banks where you can find potential to find funds, there are many alternative lenders such as independent providers of business finance solutions such as www.startpointfinance.co.uk, peer to peer funding schemes www.fundingcircle.com or look at seeking a grant rather than a loan with companies such as www.grantedltd.co.uk having access to a huge variety of available government back funding schemes.
Do your homework
Before speaking to any provider, remember it’s not all about numbers. Can you secure character references or provide case-studies to the bank? Have you had a strong credit rating? Even your personal appearance and attitude can make a huge difference!
Make sure your accounts are up to date. Could an auditor distinguish your capital from your cash flow? Banks will want to see clear accounting, identifying any assets they can count as collateral. And what are the numbers on your business plan based on? Preparation is the key to a successful application.
Could an external organisation, such as SouthWestfd, help you tidy your accounts; do your homework; or help you prepare for the questions the banks lenders will ask you? Yes, we can, so if you are going down any of the lending routes, give us a call to find out how to get your business financials into tip top shape.
Comments Off on Welcome to our newest part time Finance Director
With more and more businesses in Devon seeking part time Finance Director support, SouthWestfd has taken on additional expertise in the form of Richard Colling to cope with the increase in demand.
Richard is an Associate of the Chartered Institute of Management Accountants and has worked in a number of senior roles over 25 years, mainly in the construction, property services and facilities management industries.
He applies his breadth of experience in an energetic and collaborative manner right across a business – to owners, employees and their clients alike. Richard has strong leadership skills both within finance and the wider business delivering sound advice with objective decision-making based on effective analysis. He applies his keen commercial awareness with a pragmatic and persuasive approach to resolving issues, restructuring teams, introducing robust processes and improving efficiencies.
Richard has managed banking relationships; organised corporate restructurings, including acquisitions integration; delivered cost-saving measures; introduced new accounting systems and processes; improved budgeting and management reporting; undertaken tax compliance, and handled defined benefit pension arrangements.
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Event Cornwall, now known as Mackerel Sky, have been recognised in a survey of the most unusual cinema venues across the world. With their pop up cinemas in locations across Cornwall, showing classic water based films, the company are delighted to have had such international recognition. SouthWestfd Associate Director Jeremy Kirk has been working alongside the team now for a number of years and is proud to be part of their growth.
Here’s the full list of the 8 most unusual cinema venues
With over 33 years’ combined experience in events, Mackerel Sky provide professional event management services across a diverse portfolio of events, including City of Lights, Agile on the Beach, Ping! Cornwall, Falmouth University Graduate Fashion Show and Thrive Bath. In addition to event services, Mackerel Sky also deliver event marketing as well as education and training for in-house events organisers and those looking to learn more about the industry.
Earlier this year, Mackerel Sky adopted its new name being formerly known as Event Cornwall, to better reflect their transition of working far more as a national agency. From their Truro base, Mackerel Sky has won contracts with Somerset County Council, Literature Works, Bath and NE Somerset Council, the Philharmonic Orchestra and Bristol City Council as well as expanding their client base across Cornwall and Devon.
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We’ve had some great feedback from our Truro 15 Minute Wonders for Business Growth Event yesterday and would like to thank all attendees and speakers as well as sponsors ICAEW Business Advice Service, The Mill Consultancy and of course our hosts Foot Anstey:
“I have simply not seen the subject of content expressed so clearly.”
“It was a real pleasure to attend such an informative event with such interesting speakers. Those who didn’t go today really missed out!”
Don’t miss our next event: 24th June 2014, Taunton
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Author: Mike Watts, Associate Director, SouthWestfd
Whilst I acknowledge that some extremely successful business owners seem to ‘smell’ success, the preferred approach, however, is to do your homework, thinking through the worst case, best case and expected scenarios, understanding the financial and practical implications of each, and not forgetting to compare with ‘do nothing’, i.e. what if your competitors take the risk and you don’t?
The recession has changed the SMEs attitude to risk, less risk is now acceptable by our stakeholders, with the banks in the SME space having gone through the complete cycle. Initially Bank Managers were provided with flexibility to make local decisions using their local experience and their ‘nose’, then the banks just said ‘no’, de-risking their position completely to the detriment of small businesses, finally ending up with the logical focus on knowledge, albeit my personal experience is that the process takes far too long.
By design, there are very few entrepreneurial accountants, our first reaction is to say no, but the good ones can be persuaded by logic and a contingency. If you can persuade us, we can help you persuade your other stakeholders giving the project a greater likelihood of success.
It’s best to be on top of risk and assess what is best for your business.