What are company directors?
Company directors are office-holders; this means they have a status defined by law, with rules attached to it. They are legally responsible for managing a company’s business and can be personally liable for a company’s actions.
Normally, company directors have been formally appointed by a set legal process and are listed on the UK Companies Register. Read Different types of company directors, for more information on exceptions.
Why do companies have directors?
A company needs directors to act and make decisions on its behalf. Directors are responsible for ensuring that legal rules governing companies are complied with.
How do directors perform their roles?
The Board of Directors (known as the ‘Board’) are responsible for managing the company. They carry out strategic planning, make operational decisions, and ensure the company meets statutory obligations.
Directors have collective rights and responsibilities, which they exercise together at board meetings. Even if specific powers or tasks are delegated to a particular director or committee, the directors as a whole remain legally responsible.
For more information on the duties and responsibilities of directors, read Directors' duties.
What’s an executive director?
An executive director holds the statutory office of director but is also an employee of the company, normally in charge of a particular business area (eg the Finance or Sales Director). The executive directors together run the day-to-day business of the company.
Usually, they have one agreement with the company (ie a director’s service agreement or a Senior employment contract) that cover both aspects of their role.
An executive director’s rights, duties and status as a director remain distinct from those arising from their employment. If problems arise, both aspects of the job must be considered separately.
What’s a non-executive director?
Non-executive directors are not employees but sometimes provide consultancy services. Although non-executive directors are not employees, the company must tax their fees at source under PAYE.
They attend board meetings and have the same legal directors’ duties and responsibilities as executive directors but are not normally involved in the everyday management of a company; non-executive directors provide independent oversight of the company’s strategy, ethics and integrity.
Non-executive directors are typically appointed using a Non-executive director letter of appointment.
Read Different types of company director, for more information on the different types of directors.