What is a 'statutory director'?
‘Statutory directors’ are essentially company directors. The Companies Act 2006 defines company directors as anybody who occupies the position of a director. This can include people who have not been formally appointed as ‘directors’.
People who have the position of director have legal powers to act on behalf of a company and duties to the company. Directors collectively act and make decisions on behalf of the company. Saying someone 'sits on the Board of Directors' (often simply known as ‘the Board’) or 'has been appointed to the Board' just means that they are a director.
Different types of statutory directors
There are different roles that a statutory director can have. It’s possible for a director to sit within more than one of the categories below. For example, somebody could be classified as a de jure director and a non-executive director.
De jure directors
These are statutory directors who have been formally appointed to act as directors in accordance with the Companies Act 2006 and the company’s Articles of association.
Executive directors are employees as well as statutory directors. They generally hold a specific salaried role. They have day-to-day responsibility for running the business and are usually in charge of one area, like finance. Executive directors report to the Board and are often involved with strategic planning and implementing the Board’s decisions.
Non-executive directors (of NEDs) do not run the business day-to-day and normally only work part-time. They generally attend Board meetings and provide independent oversight of the company’s strategy, ethics, and integrity. Non-executive directors’ duties generally include acting in the interest of company stakeholders and monitoring the executive directors (eg by analysing their performance and determining how much they should be paid).
Managing directors are sometimes appointed to lead the implementation of the Board’s strategy. Their legal rights and duties are the same as other directors.
A person appointed to the Board to represent a particular shareholder or other party (eg an investor) is sometimes called a nominee director or an appointed representative. However, their legal rights and duties are the same as other directors.
A director may appoint an alternate director who can act on their behalf if they are temporarily absent. An alternate director can only be appointed if this is allowed by the company’s rules (ie the articles of association).
A person who is not appointed as a director, but whose directions are customarily followed by the Board and other directors, might be a shadow director. Shadow directors are covered by different laws from other statutory directors but they do have some of the same duties, in recognition of the influence they have over the company’s activities.
De facto directors
De facto directors are directors who haven’t been properly or legally appointed as directors but who do, in fact, act as directors by doing things that directors are normally allowed to do (eg making decisions and signing contracts on behalf of the company). Whether someone is a de facto director depends on what they do and how. However, they generally need to be seen to be acting in a senior, decision-making role rather than just being a member of the management team. De facto directors owe the company the same general duties as de jure directors. Someone who is a de facto director may also be a shadow director.
'Directors' who are not statutory directors
Sometimes, departmental heads are called directors (eg Director of Communications) even though their roles is not technically a company director role. Confusingly, if such individuals have not separately been appointed to the Board (ie appointed as a company director), they do not have the legal rights and duties of a company director. The company and the individual should be careful to ensure that other parties (eg other businesses that the person interacts with) are not misled about the status of the person with the title.
How do you know whether someone is a statutory director?
However, the Companies Register is evidential, not conclusive. A person who is not listed can be a director and vice versa. Alternate and shadow directors will not be listed on the Companies Register and may not have been appointed by a formal process. You have to look at the company’s circumstances to see who may hold these roles.