Summary and implications
The Companies Act 2006 introduced a new rule requiring all companies to have at least one natural person as a director - in other words, a director who is an individual rather than a corporate director such as a company or partnership. This provision came into force on 1 October 2008.
Companies which had only corporate directors as at 8 November 2006 when the new Companies Act received Royal Assent, were given a grace period to appoint a natural person as a director. This grace period will expire on 1 October 2010.
Companies that currently only have corporate directors need to act now and appoint at least one natural director over 16 years of age. The appointment must be made by 1 October 2010.
Reasons for the change
The rationale for the new rule is to ensure that there is always at least one person in every company who can be held accountable for its actions.
Consequences of failing to make the deadline
It is important that the deadline is not missed as failure to appoint a natural director in time could lead to the following consequences:
- Penalties and fines payable by the company, plus any daily default fines on top of this; and
- Problems filing the company’s accounts if there is only one corporate director.