Updated: Aug 20, 2021

A person who is an elected officer of a company. Many people who are not normally called directors are considered directors for purposes of the law. Any person according to whose instructions directors are accustomed to act is to all intents and purposes a director when it comes to directors’ shareholdings, close companies, etc.

Strictly speaking, directors are persons concerned with managing a company on behalf of the shareholders. They are in one sense agents of the company. They are not liable personally on contracts made in the name of the company even when acting ultra vires (though they then might be liable for breach of warranty).If they contract intra vires but outside their own powers, the company may be bound.

The first directors are often named in the articles of association and often also in the prospectus. Mention in the articles does not constitute a valid appointment until each director has: (1) signed and sent to the Registrar of Companies his consent to act; and (2) either signed the memorandum for his qualification shares, or taken up and paid for them, or shares, or taken up and paid for them, or are already registered in his name.

If there is no appointment in the articles, the first directors are appointed by the subscribers. The manner of subsequent appointments is normally specified in the articles. It is usually done by the company in general meeting, but directors often have powers to fill vacancies on the board subject to confirmation by general meeting. Only one director can be appointed by one resolution unless all members of the company previously agree otherwise. This does not apply to private companies. Private companies may have one director (but he must not also be the secretary), public companies must have two.Directors act by resolutions made at directors’ meetings. Meetings must be properly convened, and notice given to each director. A quorum must be present (the number constituting a quorum is usually stated in the articles). Directors must not make contracts with the company, they must declare any interest in contracts made for the company and the articles normally state that in this instance they have no vote. Directors must handover secret profits arising from any such transactions. Infringement of these rules will probably make the contract void. renerally, loans to directors are prohibited.

Directors have many responsibiUties including: (1) keeping proper books of account and presenting annual accounts and a directors’ report; (2) calling annual general meetings; (3) keeping registers of directors and secretaries, registers of directors’ shareholdings, share registers, etc.; (4) sending the Registrar all documents he is entitled to receive; (5) submitting a statement of affairs on winding-up.

Remuneration of directors is a matter of agreement between themselves and the company. If it is stated in the articles it can only be altered by special resolution at a general meeting. . director may be disqualified if he goes against the articles or loses his qualification. If he becomes bankrupt he can only remain a director by leave of the court. The powers of directors cease on a winding-up.

Reference: The Penguin Business Dictionary, 3rd edt.

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James Knight
Editor of Education
James is the Editor of Education for Invezz, where he covers topics from across the financial world, from the stock market, to cryptocurrency, to macroeconomic markets.... read more.