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What is a director? - Coggle Diagram
What is a director?
Executive and NEDs
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An executive director is usually a full time employee of the company and will be involved in the day to day management of the company
A NED is not usually an employee of the company, is part time and their managerial role is much more limited
The NEDs have an additional role, namely to scrutinise and hold to account the performance of management and individual directors against agreed performance objectives
Only the largest of companies tend to have NEDs, in such companies half the board, excluding the chair should be made up of iNEDs
The independence of NEDs is important in order to ensure that they provide effective scrutiny of the executive directors
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Specific board roles
This appointment will affect the tasks undertaken by the director and his authority to act on behalf of the company
The model articles provide that the director may undertake any services for the company that the directors decide
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The CEO is the head of the company with the FRC guidance providing that as the most senior executive director, the chief executive is responsible for delivering the strategy as agreed by the board
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The role of the chair is not set out in statute but the UKCG provides that the chair leads the board and is responsible for its overall effectiveness in directing the company
Nominee directors
Someone with an interest in the company might wish to safeguard that interest by having a say on the board
This power of appointment will usually be placed in the company's articles but could also be set out in a shareholders' agreement
A nominee's duty is to the company, not the person who appointed him
A person who appoints a nominee could be regarded as a person with significant control and so will have to be identified on the PSC register
Types of directors
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De facto
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The courts have stated that in order to be a de facto director, the person must
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Participate in directing the affairs of the company and act on equal footings with the de jury directors
Shadow directors
A person who effectively controls the activities of a company is to be subject to the same statutory liabilities and disabilities of a person is a de jury director
A person in accordance with whose directions or instructions the directors of the company are accustomed to act
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Alternate directors
CA2006 does not empower a director to appoint an alternate so a director will only have such a power if it is provided for in the company's articles
The model articles for private companies do not contain sucha. power but article 25 of the model articles for public companies does provide that a director may appoint another director or any other person approved by a resolution of the directors to exercise the appointer's powers and carry out the appointer's responsibilities
The articles will set out what the alternate director can and cannot do and the circumstances under which his appointment will be terminated
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Whether a director is called a director is irrelevant, the key issue is whether the person carries out the functions of the director