Hi, I am in the process of setting up a family business, me and my other close family members are all going to have director positions in the company, however our roles as directors will be different. We would like to know what are the different director positions that exist in a private limited company in the UK?
The Answer from Solicitors Online
There are several types of directors positions that can exist in a private limited company in the UK. As an overlying principle section 205(1) of the Companies Act 2006 states that a ‘director’ includes any person occupying the position of director, despite whatever name their position may be called. This means that a person can be seen as a director in the eyes of the law even if their position or title in the company does not include the word “director”.
De Jure directors
Directors appointed in accordance with the articles of association are known as de jure directors.
De Facto directors
De Facto directors, are directors who have not been legally appointed, including where a purported appointment did not follow the correct procedure, but nevertheless the person openly acts as or openly assumes the position of director despite a lack of authority and right to act. De facto directors are capable of coming within the definition of director in accordance with section 250(1) of the Companies Act 2006.
It should also be noted that the meaning of the word “director” varies according to the context in which it is to be found.
A shadow director is a person in accordance with whose instructions the directors of the company follow as defined in section 251 of the Companies Act 2006.
Shadow directors are not illegal and a company will not face any penalties for using a shadow director.
Executive and non-executive directors
An executive director is a term used to refer to a director who usually has extensive powers delegated to him by reason of the role he performs in the company and who almost certainly has a service contract with the company. The service contract will be separate from his appointment to the board.
Compensation for removed directors
Non-executive directors are essentially directors without service contracts who do not work day to day in the company. Most large companies have both executive and non-executive directors
on their boards. Both types have overall and equal responsibility for the leadership of the company.
Non-executive directors are subject to the same legal framework as their executive counterparts. However in some cases they are expected to act without the executives day to day decision-making power and detailed knowledge of the business. Although the duty of care owed by non-executive directors appears to be the same as that expected of executive directors. However the non-executive director is likely to have to do less than an executive director to fulfil his duty of care.
A nominee director is a director appointed to the board of a company to represent the interests of his appointer on that board. An example of when a nominee director could be appointed is when a company receives investment and a condition of the investment is that the investor can appoint a director to the board of the company. Such a director would be regarded as a nominee director.
A nominee director must not put the interests of their appointer before the interests of the company. So in the example of an investor who gets to appoint a nominee director, the nominee director must put the interests of the company above the interests of the investor when performing their role as a director in the company.
The managing director also known a MD is one of the most sought after director positions in a company as it comes with significant power, which can be used to influence the direction of the company. A managing director will have responsibility for the company’s performance and will report in to the shareholders whilst also being the head of board of directors.
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