The number of Local Authority Trading companies being set up is on the rise, and these can be useful vehicles; providing a platform to offer services on a commercial basis with a healthy financial return.
Most LATCOs are run by Local Authority employees and the transition into the commercial world may not be familiar to them. In addition, many of those running LATCOs are also performing other public sector duties and therefore constantly switching between their Local Authority responsibilities and the responsibilities of a director.
A director’s appointment comes with extensive legal responsibilities and alongside the tangible tasks of keeping appropriate accounting records, reporting changes to Companies House, preparing and filing corporation tax returns, comes the responsibility to run and manage the company as permitted in its Articles of Association. Many of these tasks can be outsourced, but the legal responsibility never moves away from the director.
Failure to file accounts can lead to fines while continuing to trade when the company is insolvent could lead to a prosecution for wrongful trading.
If you are an employee of a LATCO, but the directors act under your instructions, you may be classified as a shadow director, and could also therefore be caught by the roles and the responsibilities of an appointed director.
A successful company director and an effective board is one that is informed of its roles and responsibilities under the UK Corporate Governance Code and the Companies Act 2006. It is vital therefore that directors receive appropriate directors’ responsibility training.
An informed director will be much more comfortable making governance decisions and also communicating with shareholders, fellow directors and advisers.