What Is The Difference Between A Director And A Shareholder?
Both the director and shareholders have a distinct position inside a company. In simpler terms, shareholders tend to own the company and directors run it. While the positions are completely distinct from one another, a person can take on both roles. Similarly, those roles can be taken on by other different individuals as well. Shareholders are sometimes considered to have little to no power over a company while owning a majority of the shares. Still, both the director and shareholder have distinct roles over the company. It is pertinent to understand some of the major differences among them.
A Shareholder’s Position in a Company
A shareholder owns the shares that a company issues. However, the responsibility of managing and running the company is left to the directors. Shareholders tend to hold power over the decisions made related to the company, but not regularly. Shareholders are allowed to vote on decisions of the company, in exchange for owning shares, and earn a part of the profit made by the company.
As they don’t take part in daily decision making unless they are directors too. However, they tend to decide on matters such as:
- Dismissing and assigning directors.
- Altering the powers of a director.
- Transferring or issuing the shares.
- Approving loans to directors.
- Allowing large business transactions where a director has a personal interest.
- Altering the structure of the company.
- Changing association articles.
The shareholders are also responsible for the debts of a company up to the full amount of their shares. When the company has inadequate funds to support the debts, it is the legal obligation of the shareholders to make a contribution towards the debt with their shares.
A Director’s Position in a Company
Directors are assigned by shareholders to manage the company. Minimum age for being a director is 16 years old. A director can also become a shareholder in the company. They have the responsibility to ensure everything is done correctly and effectively, in compliance with the law. To ensure the success of the company, some of the decisions taken by a director to run the company include:
- Making regular decisions to effectively run the company.
- To enter the business into binding agreements with third party companies.
- Appointing employees.
- Managing the company’s taxes.
- Provide power to override address registered.
- Managing various licenses, permissions, and certifications.
- Keeping a check on finances and managing accounting records.
- Holding up meetings with the shareholders.
By calling board meetings, directors tend to make decisions, as every director declares their interest in the business proposed during the meeting.
Bottom Line
In companies where the director and shareholder are not the same, then the directors are handed extra control in the articles of associated or allowed to make choices based on the shareholder’s written permission. Yet, the shareholders still have control over what decisions are made and who makes them.