The 5 Types of Directors in an Organisation

An organisation can have various types of directors.

The law recognises the directors as the officers of the company. It also defines the duties and the powers of each type of director.

The Officers of a Corporation:

The officers of a corporation include the following:

• The directors of the company include both executive and non-executive directors.

• The company secretary: Company law makes it mandatory for all public companies to have a company secretary. His or her duties include keeping accurate minutes during meetings, signing contracts, as well as supervising and managing board procedures and policies.

• Significant decision-maker: Some organisations have a person who participates in, or has significant input into the organisation when various decisions are being made regarding its operations and the business.

• The employees of the company: The law recognises the employees of the company such as senior managers that are involved in the decision-making process of the company as officers. There may be other legislation that defines who can hold senior positions in certain industries or areas of responsibility. Companies should check if there is legislation that affects any of the senior positions before appointing employees to the roles.

Type of Directors:

1. Executive director

   An executive director is involved in the daily running of the organisation. He or she is involved in making decisions that affect daily operations.

2. Non-executive director

   A non-executive director is not involved in the daily running of the firm. The director is tasked with bringing an independent third-party perspective into the decision-making process. Usually, the non-executive directors are experts in the industry. They offer advice on various aspects of the business.

3. The managing director

   This director is appointed by the rest of the directors and is solely responsible for daily company operations. He or she is typically known as Chief Executive Officer and is an executive director.

4. De facto director

   A de facto director has not been formally appointed as a director but acts in place of a director. He or she has similar responsibilities and liabilities as an official director.

5. Shadow director

   A shadow director is similar to a de facto director in that he or she does not have an official title. However, he or she has some influence on the decisions of the board of directors.

Acting in the capacity of de facto or shadow director means this person is expected to uphold the obligations of the Corporations Act.

Want to know more?

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In Summary:

• It is important not to take on the role of a company director unless you are well-prepared to do so. Likewise, it is important not to appoint someone who doesn't have the required experience.

• If you don't want to be considered a director it's important that you are not actively participating in top-level management of the company - in these instances, people can be considered de facto or shadow directors.

• There are legal implications for acting in the capacity of a company officer which all officers and directors need to make themselves aware of.

Contact us if you would like to have more information on managing the legal risks involved with director’s duties. Our lawyers at You Legal will be happy to assist you in whatever way we can.

* This blog is for general guidance only. Legal advice should be sought before taking action in relation to any specific issues.