Why do we recommend not having too many directors?

Why is it not recommended to appoint many directors when register a new company?

We often get requests for large numbers of individuals to be appointed as directors of the same company usually for the perceived status of being a director. This is not always advisable for the following reasons:

1.       Individual credit checks are done on each director before opening a bank account and if one has a bad record the banks won’t open the account.

2.       For all overdraft facilities each director must sign personal surety.

3.       All directors have a fiduciary responsibility, meaning they can be held personally liable if they trade recklessly.

4.       Increase administration regarding all company secretarial work.

5.       If the company is de-registered the directors can be held personally liable for any of the liabilities.

6.       The decision making process is cumbersome.

7.       When registering a company It is therefore better to be shareholder rather than a director as shareholders own and control the company without the liability.

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