All companies must have directors; public companies must have at least two and private companies must have at least one. The actual number of directors necessary is fixed by the Articles of Association of each company. Directors may be called by an alternate name within companies, but the legal definition of a director is not set by job title.<\/p>\n
Directors can be \u201cexecutive\u201d or \u201cnon-executive\u201d. All directors have some non-executive duties:<\/p>\n
In addition to this, executive directors take a more active role in running the company, normally controlling one part of the company in particular. A company may have as many executive directors as it likes, with no minimum.<\/p>\n
If an executive director controls the company as a whole, they are known as the managing director (although in some companies this title will change). The managing director is considered as an agent of the company and has the ability to contract. Any contract made by the managing director, or even a director who appears to be the managing director, is binding.<\/p>\n
Directors can be removed by an ordinary resolution with special notice, under s303 of the Companies Act 1985. 28 days\u2019 notice is required so that the director may have time to prepare and present a defence.<\/p>\n
The Articles of a company may allow for the removal of a director in other ways, such as a vote of the board.<\/p>\n
If directors abuse their position, they may be disqualified from taking position as a director by the Company Directors\u2019 Disqualification Act 1986. Directors may be disqualified:<\/p>\n
Companies may independently disqualify directors by their Articles. Under Table A, a director will be disqualified if they are a mental patient, or if they become bankrupt.\u00a0 Furthermore, s293 of the Companies Act 1985 states that no director may be appointed (or reappointed) if they are over the age of 70.<\/p>\n
A director owes duties to the company similar to those owed by an agent or a partner:<\/p>\n
Rolled Steel Products Ltd v British Steel Corporation (1985):\u00a0 One director was part of RSP and Scottish Steel. Scottish Steel owed BSC some debts, but if BSC were to sue, then Scottish Steel would fold. RSP guaranteed the loan (so that if Scottish Steel didn\u2019t pay, then RSP would pay instead). The guarantee was held by the courts to be void \u2013 RSP had no interest in Scottish Steel continuing trading, so it was only in the director\u2019s interest.<\/em><\/p>\n Regal (Hastings) Ltd v Gulliver (1942):\u00a0 R owned a cinema. The directors of R decided to buy two other cinemas in the area (since three cinemas in a group were more valuable than the three cinemas separately). R, however, could not afford the cinemas. Some of the directors had some spare money, so they set up a subsidiary company with this, owned by R, the shareholders and directors. This company bought the two cinemas. The directors then sold their shares in the subsidiary, making a profit on their investment. The new shareholders then sued the directors for the profit they had made, since it had not been disclosed to R.<\/em><\/p>\n As well as to shareholders, directors have a duty (to the company) to act in the best interests of the company\u2019s employees. Since the duty is to the company, it is not possible for employees to sue for breach of duty.<\/p>\n Generally, directors do not have direct duties to creditors (due to the veil of incorporation).\u00a0 However, there are some exceptions, particularly when a company is being wound up. In this case, a director may be found personally liable if fraudulent or wrongful trading occurs.<\/p>\n Since directors\u2019 duties are to the company in general, it is rare that a director can be liable to an individual shareholder. However, minority shareholders are afforded some protection from actions of directors; these are covered separately.<\/p>\n","protected":false},"excerpt":{"rendered":" All companies must have directors; public companies must have at least two and private companies must have at least one. The actual number of directors necessary is fixed by the Articles of Association of each company. Directors may be called by an alternate name within companies, but the legal definition of a director is not … <\/p>\nDirectors\u2019 duties to employees<\/h3>\n
Directors\u2019 duties to creditors<\/h3>\n
Directors\u2019 duties to shareholders<\/h3>\n