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.
A company needs directors to act and make decisions on its behalf. Directors are responsible for making sure that legal rules governing a company are complied with.
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.
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 company from day to day.
Usually they have one agreement with the company called a Director’s Service Agreement, which covers both aspects of their role.
An executive director’s rights, duties and status as a director remain distinct from those arising from his employment. If problems arise, both aspects of the job must be considered separately.
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.