ACCA F4 - Corp and Business Law (ENG)

Part F Management, administration and regulation of companies  18: Company directors 271

1.2.1 Shadow directors and de facto directors

Shadow directors differ from de facto directors because the public (and the authorities) are rarely aware

of their existence. Whereas a de facto director performs the everyday tasks that a director would

(dealing with suppliers and customers and being present at general meetings), the shadow director exerts

their influence away from the day-to-day running of the business.

1.3 Alternate directors

A director may, if the articles permit, appoint an alternate director to attend and vote for them at board

meetings which they are unable to attend. Such an alternate may be another director, in which case they

have the vote of the absentee as well as their own. More usually they are an outsider. Company articles

could make specific provisions for this situation.

1.4 Executive directors

An executive director is a director who performs a specific role in a company under a service contract

which requires a regular, possibly daily, involvement in management.

A director may also be an employee of their company. Since the company is also their employer there is a

potential conflict of interest which in principle a director is required to avoid. To allow an individual to be

both a director and employee the articles usually make express provision for it, but prohibit the director

from voting at a board meeting on the terms of their own employment.

Directors who have additional management duties as employees may be distinguished by special titles,

such as 'Finance Director'. However any such title does not affect their personal legal position. They

have two distinct positions as:

 A member of the board of directors; and

 A manager with management responsibilities as an employee

1.5 Non-executive directors

A non-executive director does not have a function to perform in a company's management but is

involved in its governance.

In listed companies, the UK Corporate Governance guidelines state that boards of directors are more

likely to be fully effective if they comprise both executive directors and strong, independent non-

executive directors. The main tasks of the NEDs are as follows:

 Contribute an independent view to the board's deliberations

 Help the board provide the company with effective leadership

 Ensure the continuing effectiveness of the executive directors and management

 Ensure high standards of financial probity on the part of the company

Non-executive and shadow directors are subject to the same duties as executive directors.

1.6 The Chief Executive Officer (Managing Director)

A Chief Executive Officer (also commonly known as a Managing Director) is one of the directors of the

company appointed to carry out overall day-to-day management functions.

Boards of directors usually appoint one director to be Chief Executive Officer (this position is also

commonly known as Managing Director). A Chief Executive Officer (CEO) or Managing Director (MD) has

a special position and has wider apparent powers than any director who is not appointed to that position.

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