Directors - a general introduction

Welcome to the first in our series of guides about the role and responsibilities of directors. The directors of a company generally have responsibility for its day to day running. The question of who has power to do what within a company will be governed by the Articles of Association but the directors usually take all management decisions.

It is important to note that the position of a director is distinct from that of a shareholder, although a director is often also a shareholder. It is the shareholders who actually own the company.

The position of director of a private limited company is not one to take lightly. It carries with it many duties and responsibilities, and many potential liabilities.

Due to various corporate scandals and failures in the past few years such as Enron and Worldcom, there has been much investigation into the way companies are run and in particular the role of directors. This has led to more stringent requirements being imposed on directors, especially non-executive directors. Although these requirements, and the culture they breed will, it is hoped, spread throughout the business community, they do not specifically relate to private companies so will not be examined in this note.

Most of the Companies Act 2006 provisions relating to directors came into force on 1 October 2007, but where provisions do not come into force until a later date, we note this accordingly in the relevant sections.

In this series of short guides we will be looking at the complex area of a company's directors. We have split this large area in what we hope are digestible chunks.