WHO IS A DIRECTOR?

Who is a director?

Generally, a person named as director in the application for registration of a company or subsequently appointed by a shareholders’ ordinary resolution is a director of the company.

However, Section 128 of the Companies Act 2001 provides a meaning to the term “director” as:

(1) For the purposes of this Act, "directors" -

(a) includes a person occupying the position of director of the company by whatever name called; and

(b) includes an alternate director; but

(c) does not include a receivers.

 

The Act further states that "directors" includes -

(a) a person in accordance with whose directions or instructions a person referred to in subsection (1) may be required or is accustomed to act;

(b) a person in accordance with whose directions or instructions the Board of the company may be required or is accustomed to act;

(c) a person who exercises or who is entitled to exercise or who controls or who is entitled to control the exercise of powers which, apart from the constitution of the company, would fall to be exercised by the Board; and

(d) a person to whom a power or duty of the Board has been directly delegated by the Board with that person's consent or acquiescence, or who exercises the power or duty with the consent or acquiescence of the Board.

 

A reading of the above sections therefore makes it clear that the legislator in his drafting sought to include de facto and shadow directors in the definition of directors. The Act therefore provides for situation where there is no formal appointment of an individual as a director but such a person acts as a director. Consequently, such a person would be subject to the same responsibilities that apply to properly and formally appointed directors.

 

Are there different types of director?

When one deals with companies, one would often encounter directors with different titles or names, such as executive director, non-executive director, finance director, marketing director, IT director and so on. However, it is important to note that the Companies Act 2001 does not distinguish between  these different titles and types of directors, and accordingly, all directors have the same statutory duties and obligations to the company and must participate in the joint deliberations of the company.

In practice, an executive director is a full-time working director who is employed by the company and who is often assigned specific executive tasks depending on his domain of expertise. On the other hand, a non-executive director is not an employee of the company and is only expected to devote part of their time to the affairs of the company. The non-executive director will often be expected to bring a certain level of independence to the Board of directors and thus balance out the making of decisions at Board level. Notwithstanding these practical explanations, non-executive directors should note that as per the law, their duties and liabilities are the same as executive directors and they should therefore exercise their duties as directors with caution.


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