Directors and Shareholders – different as Lemons and Limes!

MD and founder of HR180, Claire Morley-Jones, is a thought leader across the HR and Strategy organisational functions. Here Claire talks about a client’s recent experiences where senior roles have not been clear and the potentially expensive – and definitely damaging – consequences.

By Claire Morley-Jones

I have recently been working on a large and complex case involving three individuals who are both Directors and Shareholders in the same company. Leaving aside the very intricate ins and outs (and the salacious gossip!), what has become very apparent over the investigation, appeal and numerous discussions is that two out of three do not, in any way, understand the difference between being a Director and a Shareholder!

It’s made me think about similar situations I have dealt with over the years and how there always seems to be a murky underbelly in relation to this issue and how easily the two roles become confused! I thought, therefore, that it was time for a refresher – dry as this subject is.

So, as simply as possible (mainly for my own benefit) – Shareholders OWN the company. The company would not exist as an entity if someone had not invested in it, which brings it legally to life. Directors MANAGE the company. They are appointed, at the Shareholders discretion, to run the company and sort out the nuts and bolts of making it work on a day to day basis!

In the style of Blue Peter here is one I made earlier, and, in a handy cut out and blue tac format in the HR180 White Paper on this subject (please scroll down for link). You know you need this on your wall ?!

It’s very important to be clear as to which hat you are wearing when you take important business-related decisions and whether you have followed your Shareholders Agreement, Articles of Association and Directors Service Contracts! It’s also very wise to have these checked to ensure they match – I have been working on a few cases recently where the documents (prepared by different parties) have differing clauses and specifications!

We are happy to take a look over your contracts – at all levels – so get in touch for more information. Meanwhile here is the free download on this subject.

Directors vs Shareholders downloadable