The rules for appointing a director are set both by law and by a company’s governing documents (the articles of association). Make sure that you read the articles before you start, to check the process and requirements.
A company’s shareholders can appoint directors. This is usually done by passing an ordinary resolution in favour of the appointment (ie a majority of the shareholders agree to the appointment). Make sure to check the articles to see whether they impose any different requirements (eg requiring at least 75% of shareholders to agree to the appointment).
The Board of Directors (also known as the ‘Board’) can normally also appoint directors but check whether the articles say that they can do this and whether the shareholders must then confirm the appointment at a general meeting.
Executive directors are appointed using a type of contract of employment appointment (a service agreement), which covers their employment status, office as director and the relationship between these. A Senior employment contract may also be used to appoint an executive director. Non-executive directors are appointed using a Letter of appointment (LOA). This is a contract setting out the terms of the appointment. For more information on the types of company directors, read Different types of company director.
In general, the Board can decide the terms of the appointment. However, the law or a company’s articles will take priority over the LOA or Service Agreement if there is a contradiction.
Filing requirements on appointment
Appointment of a director must be notified to Companies House - either Companies House in Cardiff for companies registered in England and Wales, or Companies House in Edinburgh for companies registered in Scotland. This must be done within 14 days of the appointment.
On the appointment of a new director, the company must also update its register of directors and register of directors’ residential addresses.