FOR LAWYERS

Director

By
Lia Kopin-Green
/
December 11, 2022

What is a Director?

A director is a person appointed or elected by shareholders to sit on the board of directors in a corporation. Generally, directors hold the authority to implement corporate policies and participate in voting to pass board decisions. Moreover, directors typically have a degree of power relating to the management or administration of a company. The board is also held legally responsible for actions committed by agents, officers, employees, and subsidiaries of the corporation.

According to United States business law, directors must act with care, loyalty, and goodwill with regard to all acts done on behalf of the corporation. In most states, a minimum of three directors is required on a corporate board.

Key Takeaways 

  • In corporate and business law, a director is an individual appointed or elected by shareholders to sit on the board of directors of a corporation.
  • Directors are involved in creating and implementing corporate policies, participating in voting to pass management decisions and other important duties.
  • Although requirements vary depending on the state, most jurisdictions require a minimum of three directors per corporate board.

State Regulations for Directors

Each state has its own laws regarding the operation of directors in a corporation. In many states, the law requires that a minimum of three directors should sit in each corporate board. Nonetheless, larger corporations may have over 10 individuals serving on the board. Alternatively, some states may allow smaller businesses to operate with a single director.

Certain states also require that directors hold annual meetings. 

Executive vs. Non-Executive Director

In the United States, there are two main types of directors in business law: executive directors and non-executive directors. There is quite a bit of confusion between the two terms, but it is important to keep in mind that they are substantially different. 

Executive directors are generally responsible for the daily management and routine of a company, alongside senior management. They work alongside other board members and are often considered employees of the company itself. Additional responsibilities include assisting with public relations and in some cases, leading fundraising efforts. Common examples of executive directors include CEOs and CFOs.

Non-executive directors, on the other hand, are not employees of the company. Also known as NEDs, non-executive directors carry out essential corporate duties such as monitoring executive directors, developing strategy and managing financial risks. Simply put, non-executive directors have a much broader oversight than executive directors. A chairman of a corporation may be considered a non-executive director.

Bottom Line

In order for a company to function properly, there are a number of players involved. Becoming familiar with the different positions in a company including executive directors, non-executive directors and officers is key in understanding how a corporation works. If you have any more questions about directors, or about business law in general, reach out to one of our seasoned attorneys today. Our lawyers at Attorney At Law are here to provide top-notch, personalized service in all things business law.

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