With respect to a company, a director is an official of the company who is the person who is in charge of maintaining control of the conduct and management of the affairs of the company. All the directors of the company are collectively known as the board of directors and it is common for the board of directors to appoint one of its members to act as chairman of the board.
In theory, the company is controlled by two bodies: the board of directors and the shareholders. In practice, however, it is the type of company that controls the amount of power exercised by the board and in small private companies the directors and shareholders are usually the same entities, so there is hardly any division of power. In the case of large listed companies, the board of directors has the supreme role in most situations with individual responsibility and management generally delegated to professional executive directors who are responsible for particular areas related to different operations. of the company.
In the case of large public companies, the board of directors usually has the last word. In general, it is difficult to overcome voting blocks due to the large number of shareholders involved and also due to the practice of institutional shareholders such as banks and pension funds empowering the board to vote their shares at general meetings, which influences on how the business will function.
The board of directors is the result of an incremental legal history and was, until the end of the 19th century, regarded as an agent of the company acting under the control of the shareholders at a general meeting. In most business settings, directors are appointed and removed through a voting system conducted by the company’s shareholders at a general meeting. The directors may resign or, in the event of death, be replaced by another and may also be dismissed with the approval of a resolution by the remaining directors. In reality, it can often be quite difficult to remove a director by passing a resolution. A good set of board forms would surely contain a template for voting for a new board member.
The board of directors can exercise its powers at meetings and most bylaws allow sufficient advance notice to all directors of these meetings. There must be a quorum before conducting business for the company. Because directors exercise control and manage the affairs of the company and companies are run for the benefit of shareholders, there are laws that impose strict duties on directors in the performance of their duties. The duties imposed on directors are known as fiduciary duties and are very similar to those imposed by law in other similar positions of trust, such as those imposed on agents or trustees.
The functions of the members of the board of directors are committed to society and not to any other body. In addition, the members of the board of directors must act honestly, in good faith and as the directors must act in what they consider to be the best interest of the company. In addition, directors must exercise their powers for a proper purpose. Most of the time, an inappropriate purpose will be readily apparent and can include instances such as directors acting to make their own nests or acting in a way that is detrimental to the best interests of the company and is more for personal gain or gain.
The directors must not act without obtaining the consent of the company, conditioning their discretion in relation to the exercise of their powers and they must not force them to vote in a certain way at the board meetings held in the future. As a trustee, directors cannot be placed in a position where there is a conflict of interest between their own interests and the duties they owe to the company. Additionally, directors may not use company information and opportunities for personal gain.
The members of the board of directors cannot compete directly with the company without the result being a conflict of interest. In case of breach of duties, the law allows some remedies such as court orders or statements, damages or compensation, restitution of company property, termination of the corresponding contract, profit account and also summary dismissal.
