All companies are required to have at least one director, and a minimum of one individual person (as opposed to other companies) among its directors.
English company law imposes certain duties on directors, such as:
- Duty to act in accordance with the powers conferred on them by the company’s memorandum and articles of association, the law and the shareholders
- Duty to promote the success of the company
- Duty to exercise independent judgement
- Duty to exercise reasonable care, skill and diligence
In legal proceedings, a person who has not been formally appointed a director and does not appear on the company register, may still be subject to the duties of a director if they undertake the day to day tasks of a director. This is known as a ‘Shadow Director’. Shareholders of organisations who have influence over decisions that the Board of Directors make can also fall into the category of a ‘Shadow Director’ by the law.
A company director has many duties and liabilities for the organisation they lead, and so taking up the position of a director should not be done lightly. For example, directors are not usually personally liable for the company’s obligations to third parties. However, there are exceptions to this, such as if a director has known that the company is insolvent and yet continues to allow the company to incur liabilities. In this instance, a director can become personally liable for obligations incurred. Additionally, the law presumes that a director is fully aware of the activities of a company and ignorance of those activities is no defence against a claim for breach of their duties.