Shareholders and directors have two completely different roles in a company. The shareholders (also called members) own the company by owning its shares and the directors manage it. Unless the articles say so (and most do not) a director does not need to be a shareholder and a shareholder has no right to be a director.
Therefore, a director essentially manages the company on behalf of the shareholders. However, a shareholder does not have an inherent right to be a director. With the same token, a director is not required to be a shareholder, unless it is stated in the constitution.
The role of a director is usually much more hands-on with the day-to-day running of the business. Company directors also have far more responsibilities to the business than shareholders do. It’s their job to manage the company effectively, make sure it complies with the law, and benefits its shareholders.
Roles: Both the shareholder, as well as the directors, have to play critical roles in the company. … The same person can assume both the roles unless articles of association of the company prohibit it.
Generally it is the shareholders that hold the power in the company with the directors being responsible for its day to day running. In most successful companies the directors and shareholders work closely together and are open and transparent about the actions and direction the company will take.
Section 168(1) of the Act states that the shareholders can remove a director by passing an ordinary resolution at a meeting of the company. … This must be given to the company at least 28 clear days before the meeting at which the resolution will be moved.
Stockholders can have considerable influence in a business because they own it. A shareholder who owns a majority stake clearly controls the company, but even small shareholders can wield influence, individually or collectively, through their shareholder rights.
Who Cannot be a director of a company?
Only an Individual (living person) can be appointed as a Director in a Company. A body corporate or business entity cannot be appointed as a Director in a Company. A company can have a maximum of fifteen Directors – it can be increased further by passing a special resolution.
However, if there are non-working shareholders in the company, it is possible to create different classes of share to prevent them receiving the same dividend rate as directors working fulltime. Dividends can only be paid on profits made by a company that year, or undistributed profits from previous years.
Can the shareholders overrule the board of directors? … Shareholders can take legal action if they feel the directors are acting improperly. Minority shareholders can take legal action if they feel their rights are being unfairly prejudiced.
The Company as a Separate Legal Entity
If a company is unable to repay a loan, both the directors and shareholders cannot be held liable. The company is solely liable to repay the loan.