Jan 24

You have been appointed – but what kind of director are you?

Written by Jonathan Mortimer
Partner

DDI: 01423 726608
M: 07850 993952
E: jonathan.mortimer@raworths.co.uk

A guide for directors: what you should know before accepting the appointment.

This is article 1 from a series of 10 written by Jonathan Mortimer, a Dispute Resolution Partner at Raworths.  The guide is written from the viewpoint of where things may become contentious and involve legal proceedings. It presents a snapshot of the some of the legal issues which impact upon directors.  It is not a substitute for taking specific legal advice on a particular set of circumstances.

1.You have been appointed – but what kind of director are you?

Here is a list of 7 different types of director from the obvious to the more obscure.

Executive director

This is the individual who has been formally and validly appointed to the board and is usually involved in the day-to-day management of the business and taking strategic decisions concerning the company.

Such a person is also usually an employee of the company and therefore has duties as both a director and an employee.

Managing Director

This director is likely to be a figurehead and be focused on the direction and strategy of the company.

Non-Executive Director

Assisting the board, these directors usually bring particular skill and experience to the board sometimes on discreet issues and rarely take on the day-to-day running of the business.

Alternate Directors

These are directors which can be appointed in accordance with the articles of association to step in as a director as and when required.  For example, when there may otherwise be a difficulty in getting sufficient numbers of directors to hold a board meeting and make decisions.

Nominee Director

Such directors are frequently seen where there may be a joint venture and a nominee director is appointed by a major shareholder to represent their interests and views.

De Facto Director

This individual has never been properly appointed but has always assumed the status and function of a director. For example, they may have made key decisions for the company and held themselves out as a director to third parties.

Shadow Director

This is an individual who does in effect play a key part in running the business but who does not want to accept the responsibility of being a director in name or may even be banned for standing as a director due to a disqualification or former personal bankruptcy.

What all 7 forms of director have in common is that, with just a few acceptances, they are all bound by 7 key principles of conduct expected of directors.  These are:

• To act within their powers
• To promote the success of the company
• To exercise independent judgment
• To use reasonable care and skill in their role
• To avoid conflicts of interest between the company and their personal affairs
• Not to accept benefits from third parties
• To declare any interest they may have in a transaction that the company is proposing to enter into.

A guide for directors: What you should know before accepting the appointment.

Links to other articles in the full series can be found here when they are published:

1. You have been appointed – but what kind of director are you?
2. The top 5 things directors do wrong – including the consequences
3. The Board of Directors cannot agree anything
4. Shareholders – the director’s ultimate master
5. Directors’ loan accounts – the best overdraft you can get?
6. Personal liability – so much for limited liability
7. Becoming a non-executive director – the risk free option?
8. Wrongful trading – the risks facing directors when the company is insolvent
9. The wound-up company – it’s not all over yet for directors
10. The phoenix that rises from the ashes – the company which refuses to die

Jonathan Mortimer has significant experience dealing with contentious company matters including the issues covered in this guide.   Jonathan can be contacted by email at jonathan.mortimer@raworths.co.uk or telephone 01423 566 666

Published on 25 January 2024