The Companies Act 2006 is the primary legislation governing companies in the UK. At over 1,300 sections, it is one of the longest Acts of Parliament ever passed. It sets out the rules for forming a company, running it, accounting for its activities and eventually winding it up.
Every director of a UK limited company needs to understand its key requirements. Ignorance is not a defence – directors who breach the Act can face personal liability, fines and disqualification.
Company formation and constitution
Articles of association
Every company must have articles of association – the rules governing how the company is run. If you do not file bespoke articles, the model articles prescribed by the Act apply by default.
The articles cover matters including:
- How directors are appointed and removed
- How decisions are made (board resolutions, shareholder resolutions)
- Share transfer restrictions
- Dividend distribution rules
- Authority to allot shares
Registered office
Every company must have a registered office address in the UK (in England, Wales, Scotland or Northern Ireland, matching where it is registered). This is a public address where official correspondence and legal notices are sent.
Company name
The name must end with “Limited” or “Ltd” (or Welsh equivalents for Welsh companies). It must not be the same as or too similar to an existing registered name, and it must not contain certain sensitive words (such as “Royal”, “British”, “Authority”) without approval.
Directors’ duties
The Act codifies seven directors’ duties (sections 171-177). These apply to every director – executive, non-executive, de facto and shadow directors.
| Duty | Section | Summary |
|---|---|---|
| Act within powers | s171 | Act in accordance with the company’s constitution and exercise powers only for the purposes for which they were conferred |
| Promote the success of the company | s172 | Act in good faith in the way most likely to promote the success of the company for the benefit of its members as a whole |
| Exercise independent judgement | s173 | Do not simply defer to others; form your own view |
| Exercise reasonable care, skill and diligence | s174 | Apply the care, skill and diligence that a reasonably diligent person would exercise in the role |
| Avoid conflicts of interest | s175 | Do not place yourself in a position where your personal interest conflicts with the company’s interest |
| Not accept benefits from third parties | s176 | Do not accept benefits from third parties that arise from your position as director |
| Declare interest in transactions | s177 | Disclose any personal interest in proposed transactions with the company |
Section 172 in practice
Section 172 requires directors to have regard to:
- The long-term consequences of decisions
- The interests of employees
- The need to foster business relationships with suppliers, customers and others
- The impact on the community and environment
- The desirability of maintaining a reputation for high standards of business conduct
- The need to act fairly between members of the company
Companies qualifying as large or medium-sized must include a section 172 statement in their strategic report, explaining how directors have had regard to these matters.
Accounting requirements
Duty to keep adequate accounting records
Every company must keep accounting records that are sufficient to show and explain the company’s transactions and to disclose the company’s financial position with reasonable accuracy at any time (sections 386-389).
The records must include:
- Day-to-day entries of money received and expended and what for
- A record of the company’s assets and liabilities
- Statements of stock held at the end of each financial year
- Stocktaking statements supporting those stock figures
Records must be kept for at least 6 years from the end of the accounting period (3 years for private companies under the Act, but HMRC requires 6 years for tax purposes – the longer period applies in practice).
For full details on retention periods, see our guide on how long to keep accounting records.
Annual accounts
Every company must prepare annual accounts for each financial year. These must give a true and fair view of the company’s financial position and profit or loss.
The accounts must include:
- A profit and loss account (income statement)
- A balance sheet, signed by a director
- Notes to the accounts
- A directors’ report (unless the company qualifies as small and opts to exclude it)
- A strategic report (medium-sized and large companies)
- An auditor’s report (unless the company is exempt from audit)
Small company exemptions
Many UK companies qualify as small and can take advantage of reduced reporting requirements:
| Criterion | Small company threshold |
|---|---|
| Turnover | Not more than £15 million |
| Balance sheet total | Not more than £7.5 million |
| Average number of employees | Not more than 50 |
These thresholds apply to financial years beginning on or after 6 April 2025. A company qualifies as small if it meets at least two of these three criteria. Small companies can:
- File abridged accounts at Companies House (the planned withdrawal was paused in October 2026)
- Claim exemption from audit (if it qualifies as small and is not excluded, for example as a public company)
- Omit the directors’ report and strategic report from filed accounts
Micro-entity exemptions
Even smaller companies (meeting at least two of: turnover not more than £1 million, balance sheet total not more than £500,000, not more than 10 employees) can file micro-entity accounts, which are even simpler.
Filing obligations
Confirmation statement
Every company must file a confirmation statement at Companies House at least once every 12 months. This confirms that the information Companies House holds about the company is up to date, including:
- Registered office address
- Directors and secretary
- People with significant control (PSC register)
- Share capital and shareholders
- SIC codes (nature of business)
Companies House charges a filing fee each time, which is lower online than on paper.
Annual accounts
Annual accounts must be filed at Companies House within:
| Company type | Filing deadline |
|---|---|
| Private company | 9 months after the financial year end |
| Public company | 6 months after the financial year end |
Corporation Tax return
Separately from Companies House, you must file a Corporation Tax return (CT600) with HMRC within 12 months of the end of the accounting period. Corporation Tax itself must be paid within 9 months and 1 day.
Late filing penalties
Companies House imposes automatic penalties for late filing of annual accounts:
| How late | Private company | Public company |
|---|---|---|
| Up to 1 month | £150 | £750 |
| 1 to 3 months | £375 | £1,500 |
| 3 to 6 months | £750 | £3,000 |
| Over 6 months | £1,500 | £7,500 |
If you file late in two consecutive years, the penalties are doubled.
Shareholder rights
The Act provides shareholders with significant rights:
- Right to attend and vote at general meetings
- Right to receive dividends when declared
- Right to appoint and remove directors by ordinary resolution
- Pre-emption rights on new share issues (existing shareholders must be offered new shares in proportion to their existing holdings before they can be offered to others)
- Right to petition for unfair prejudice (section 994) if the company’s affairs are being conducted in a way that unfairly prejudices their interests
- Right to a derivative claim (section 260) to bring proceedings on behalf of the company
People with significant control (PSC)
Every company must keep a PSC register identifying individuals who have significant control over the company. A person has significant control if they:
- Hold more than 25% of the company’s shares
- Hold more than 25% of the voting rights
- Have the right to appoint or remove a majority of the board
- Have the right to exercise or actually exercise significant influence or control
PSC information must be reported to Companies House on the confirmation statement and kept up to date.
Directors’ personal liability
Directors can face personal liability for breaches of the Act:
| Breach | Consequence |
|---|---|
| Failing to keep adequate accounting records | Criminal offence; fine and/or imprisonment (up to 2 years) |
| Failing to file accounts and returns | Penalties; repeated failure can lead to disqualification |
| Fraudulent or wrongful trading | Personal liability for company debts; up to 10 years’ imprisonment for fraud |
| Breach of directors’ duties | Liable to compensate the company for losses caused |
| Making a false statement to Companies House | Criminal offence; fine and/or imprisonment |
Directors can be disqualified under the Company Directors Disqualification Act 1986 for periods of 2 to 15 years for misconduct, including allowing a company to trade while insolvent.
Practical compliance for small companies
For most small company directors, the key compliance actions are:
- File annual accounts at Companies House on time
- File the confirmation statement annually
- Keep the PSC register up to date
- Maintain adequate accounting records
- File the Corporation Tax return and pay CT on time
- Act in accordance with your directors’ duties – particularly section 172
- Notify Companies House of changes to directors, registered office or share capital within the required timeframes