If you’ve found this guide, then you’re likely wondering: how many directors can a business have? Is there a minimum or maximum number of directors? Do too many cooks spoil the broth? 

Finding the right balance between being a solo director or having too many people involved will depend on several factors. 

In this guide, we’ll explore the role of a company director, the minimum director requirements, and whether one person can ‘wear all the hats’ or if you’ll need to appoint more directors in future. Keep reading to learn more about company directors, or if you’d like support with company formations, you can contact us today. 

The role of company directors 

Every limited company must be registered with Companies House, and part of this process is appointing company director(s). A company director is legally responsible for managing the company and must adhere to a statutory code of practice, which includes specific legal obligations.

From a legal standpoint, a company director:

• Must be at least 16 years old.
• Cannot be an undischarged bankrupt.
• Cannot be the company auditor.
• Cannot be disqualified from directing another company.

Being a director involves complying with the seven key duties outlined in the Companies Act 2006, including acting within your powers, avoiding conflicts of interest, exercising reasonable care, skill, and diligence, and promoting the company's success.

These duties are essential to ensure you act in the company's and its shareholders' best interests. You may face legal consequences if you fail to fulfil these responsibilities. 

Learn more about the role of a limited company director in our comprehensive guide.

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How many directors should a company have?

A private limited company should have at least one director who is a natural person – defined by being an individual human being as opposed to a company or organization. There is no upper limit to the number of directors a company can have unless otherwise stated in the company’s Articles of Association.

Can another company be company directors?

Although a company can be a company director presently, there must be at least one director who is a natural person. This is because under the Small Business, Enterprise, and Employment Act 2015, this is looking to be phased out. 

Can shareholders be company directors?

Yes, shareholders can be directors, but they don’t have to be. 

Minimum director requirements and why they matter

Now we know that there is a minimum director requirement of one… But why is this the case?

Under the Companies Act 2006, limited company directors are legally responsible for the running of the business. While a company is a legal entity in itself, there needs to be at least one natural person responsible for making key decisions, keeping the best interests of the shareholders and ensuring regulatory compliance.
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The realities of appointing multiple directors

While one director is the minimum legal limit, there is no upper limit to the number of directors a company can have. Many businesses have several company directors responsible for various aspects of the business operations. 

While every company is different, it’s still worth looking into the pros and cons of appointing multiple directors to run your company.

Benefits of having multiple directors:

• Access to a wider skill set: Each director will bring unique skills and expertise, giving your company a substantial headstart against those with limited experience.
• More efficient day-to-day operations: The more people with control, the easier it is to get sign-off on significant changes, as long as everyone is on the same page.
• Ensures the company’s best interests: Company directors drive forward the business goals, so having a solid group will ensure you are all working in the right direction.
• Easier to distribute the workload: Having a strong team of directors should minimise blockers so people can get on with what matters. 

Disadvantages of having multiple directors:

• Decision-making may become inefficient: With too many directors, reaching a consensus may be difficult, especially if directors have differing priorities.
• Dilution of responsibility: The larger the board, the more likely it is that individual directors will feel less personally responsible for key decisions. 
• Increased costs: Directors are entitled to compensation (e.g., salaries, dividends, loans) if a contractual agreement is in place. Having multiple directors with contracts can significantly increase costs.
• Regulatory and compliance concerns: Directors have a fiduciary duty to act in the company's best interests. A larger board of directors may attract greater scrutiny from regulatory bodies.
• Reputational risks: Your company’s reputation will be impacted by any legal activity of directors, so the more directors you bring on board, the higher the risk of exposing the business to criminal activity. 

How many directors should a private limited company have?

The number of directors depends on the company and its requirements. According to the Corporate Governance Institute, “any number beyond ten directors will be hard to justify in terms of the effort and cost to sustain them.” 

When appointing company directors, it’s best to look at your business and carefully select who would work best in the director role.

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Appointing a new company director

Remember: company directors can be added at incorporation and at a later date. To add a company director after incorporation, you need to follow these steps:

• Check the company’s Articles of Association to ensure that the new director meets any requirements
• Fill out the AP01 form on the GOV.UK website, you’ll need the following information:
  
  • Full name and any previous names used within the last 20 years
  • Nationality
  • Date of birth
  • Date of appointment as director
  • Previous and current occupation, if any held
  • Service address
  • Residential address
• Inform Companies House of any changes

Need to remove a director? Learn more about this process in our comprehensive guide.

Can one person wear all the hats? Is a sole director, shareholder, and secretary a good idea?

Technically, a limited company can have one director, and that person can be the sole director, shareholder, and company secretary. But it’s worth considering the risks involved in putting all of your eggs in one basket. 

1. Consider workload

For starters, this is a lot of responsibility for one person to take on, and your company can benefit from having specialised people in these roles– particularly for a company secretary, which businesses often appoint an accounting firm to assist with. Appointing a company secretary can reduce the workload of directors and bring in an experienced administrative eye to ensure regulatory compliance.

2. Signing restrictions

Another issue with having only one person in all of these roles is that you cannot sign a document in both capacities. So, if you are the only director and the company secretary, then you may need to sign in the presence of a witness. 

3. Conflicts of interest 

While technically, a director, shareholder, and secretary should all work towards common goals, having the same person fulfil all roles might cause a conflict of interest. For example, when a company secretary is also a director and/or shareholder, they might be tempted to make decisions in their personal interest rather than those that adhere to their administrative or fiscal responsibilities.

Choosing the right path for your company

Hopefully, you’re now closer to determining how many directors to appoint for your company. As we’ve explored in this guide, you must consider your company’s needs, governance structure, and operational goals. 

While appointing multiple directors can bring a broader skill set, improved efficiency, and better workload distribution, it can also lead to challenges, including decision-making delays, increased compensation costs and even potential compliance risks.

Ultimately, you need to assess your company’s unique circumstances and prioritise a balanced approach to appoint directors who best align with their objectives. 

Are you starting a new company, appointing new directors, or experiencing another period of change in your business? Speak to Crunch today. Our team of qualified accountants works alongside cloud-based software to provide expert and efficient service to business owners.

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