Types of Company Director
In addition to those who are formally appointed as directors, any person, other than a professional adviser, with whose instructions the directors of the company normally comply is a shadow director. In other words, where a person who is not a director exerts such an influence over the company’s directors that those directors are accustomed to acting in accordance with that person’s instructions, that person is a shadow director. The significance of being a shadow director is that a shadow director has many of the legal responsibilities of a director.
Alternate directors are persons who are nominated by a director to act in their absence. An alternate director can only be appointed with the agreement of a majority of the directors.
De facto Directors
A de facto director is a person who has not been validly appointed or who is disqualified but who in effect occupies the position of, and acts as if he were, a director.
In addition to the legal categories of director as set out above, other terms are used in business to describe company directors. In practice company directors are generally categorised as either being executive directors or non-executive directors. However,
it is important to note that these are not legal classifications but rather are distinctions drawn under corporate governance best practice. Regardless of whether an individual is an executive or non-executive director, they have exactly the same legal responsibilities.
Executive directors are directors of the company who are involved in the day to day management of the company. As these individuals are involved in the management of the company they may, in practice, have specific titles within the company, for example, managing director, marketing director or finance director.
Non-executive directors are not involved in the day to day management of the company and are appointed from outside the company.
It should be noted that there is no legal obligation for a company to appoint non-executive directors, however, certain companies listed on the Stock Exchange are required to comply with codes of corporate governance best practice which do require the presence of non-executive directors on the board.