Generally speaking, subject to the articles of association and certain matters which require shareholder approval, the Directors have full rights to exercise all powers of the company.
The board acts as the ‘governing body’ of the company and has a multifaceted role, being responsible for (amongst others):
It is not uncommon, especially in owner managed and smaller businesses, for the Directors of a company to also be Shareholders and Employees. For illustration, take for example ABC Limited:
ABC Limited is a private company limited by shares. It has two Directors (A and B) and two Shareholders (A and B) who each hold 50% of the share capital of the company. A is employed by the company and receives a salary (just like any other employee) as well as profits from the company by way of dividends. B is not employed by the company and only receives dividends.
In this example, A is wearing all three ‘hats’. He is a Director, a Shareholder and an Employee. B is only wearing two ‘hats’ as he is a Director, a Shareholder but not an Employee. This is a typical ownership and management structure.
It is important for Directors to distinguish between each ‘hat’ and the distinctive roles, responsibilities and priorities which are associated with it. Although, from a legal perspective, the roles are very different, they invariably overlap in practice which can cause confusion and issues.
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Key decisions are taken at board level. Generally, the Directors have the power to regulate their own board meetings as they see fit (i.e. frequency, agenda etc.). Any Director has the power to call a board meeting, however:
Unless the articles of association say otherwise:
The articles of association may provide for the appointment of a chairman to the board. The role of the chairman is primarily an ambassadorial and representative role. The chairman is usually chosen by the Directors and is, more common than not, carried out by a Non-executive Director. The chairman may, in circumstances where there is an equality of votes at board level (i.e. deadlock), have an additional casting vote.
For further help or advice, please contact Jonathan Oxley.
Please note this information is provided by way of example and may not be complete and is certainly not intended to constitute legal advice. You should take bespoke advice for your circumstances.
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