What is a directors’ report?

You might have heard of a directors’ report, but what exactly is it and why does it matter? 

A directors’ report is a document that gives shareholders a peek into your company. It covers your activities over the last year, any challenges faced, and your plans for the future.

While it’s a requirement for some companies, not everyone needs to file one. Let’s dive into what a directors’ report is and who needs to prepare and file it.

Who needs to file one?

First things first, who’s responsible for this report? If you’re a company director, it’s your job to put this report together each year.

According to the Companies Act 2006, this is a legal requirement that helps to make sure companies stay transparent and accountable.

So, what’s the purpose of a directors’ report?

Essentially, it keeps everyone in the loop. Especially shareholders who want to know how their investment is doing. It outlines your financial position, how you’re doing compared to competitors, and your plans for the future.

Let’s take a closer look at what’s included.

Here’s what to include in your report:

Your directors’ report should start with:

• The names of the director(s) 
• The primary activity of your company

The rest of the report will vary depending on the company, but it usually includes:

• Financial health. How is your company doing financially? Use the directors’ report to break down your financial performance over the last 12 months.
  
• Future plans. What’s next for your company? Outline your strategies and goals for the future, giving stakeholders a glimpse of what’s to come.
  
• Industry insights. How are you doing compared to the competition? Touch on your performance compared to the industry and your wider market.

• Compliance and responsibility. This is your chance to show you’re playing by the rules. Demonstrate how you’re meeting your legal obligations, following accounting standards, and embracing social and environmental responsibilities.

Just a little reminder: You’ll need to back your report up with financial information and KPIs (key performance indicators).

What are the benefits of filing one?

A directors’ report isn’t just a legal requirement. It can actually be really useful when it comes to communication, transparency, and planning. A directors’ report can help you to:

• Offer a clear overview of company activities. The report gives a snapshot of the company’s activities and performance over the past year, making it easy for everyone to see what’s been happening.
  
• Improve communication. A directors’ report can help to bridge the gap between directors and shareholders.
  
• Identify problems and highlight risks. By reviewing your activities and finances, you might spot potential problems early. Or, you can plan how to handle them.
  
• Build shareholder confidence. Transparency in the report builds trust among shareholders, showing them that the company is well-managed and honest about both successes and challenges.
  
• Explain your strategy. By outlining your strategy and future plans, shareholders can better understand them.
  
• Record your decisions. The report will keep a record of your decisions and actions, which can be useful for future reference.
  
• Receive feedback. Shareholders will have an opportunity to offer more regular feedback, leading to better discussions and improvements.

How do I file a directors’ report?

You can file a directors’ report yourself, but most companies prefer an accountant to handle it. An accountant can ensure you’re compliant and have all the information needed.

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