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What Is The Difference Between A Shareholder Of A Company And A Director Of A Company?

 

In a small private company which is set up and run by two or three people, it is very common that these few people are both the directors and shareholders of the company.

However, in law, these are two separate and distinct functions; essentially the shareholders are the beneficial owners of the company and the directors are the managers of the company.

You do not necessarily have to hold shares in a company to be appointed a director unless the Articles of the company specify that you do. Equally, you can be a shareholder in a company without being a director or having any managerial responsibility. This is particularly true of public companies who may have thousands of individual shareholders whose only say in the business affairs of the company are when they cast their votes at the Annual General Meeting (AGM).

A lot of the day to day decisions involved in running the company are determined by the directors in board meetings but, under the Companies Act and the Articles of the company, some matters require the consent of the shareholders which can be obtained either at a general meeting or by written resolution; these matters include giving the directors authority to allot new shares, change the name of the company, adopt new Articles, disapply pre-emption rights, remove a director, approve a loan to a director or approve substantial property transactions.

If you are interested in learning more about the difference between shareholders, directors and other company officer roles, you can read our guide