Powers & authority

  • The board

    The directors act as a board but the board may (if the articles permit, as they generally will) delegate powers to a committee of board members or to an individual director.

  • Non-executive directors

    Non-executive directors are, as their name implies, directors to whom no executive powers have been granted by the board. Although they have no executive powers, they can vote at board meetings and have the same duties as executive directors.

  • Executive directors

    Executive directors are generally employees with specific powers delegated to them either by a resolution of the board or under their service contracts.

  • Managing directors

    Most companies have a managing director (sometimes called a chief executive). He is granted more extensive executive powers by the company's articles or by board resolution.

  • Exceeding authority

    Directors should not act outside the scope of the powers delegated to them. Major contracts and commitments should always be authorised by board resolution. A director who exceeds his powers (for example, by signing a contract not authorised by the board) may incur personal liability for the performance of the company's obligations under that contract. However, he will be relieved from such personal liability if the board subsequently ratifies his actions.

    If a director is liable for conduct amounting to negligence, breach of duty, default or breach of trust, the power to ratify such conduct lies with the shareholders. The shareholder resolution ratifying such conduct must be passed without counting the votes of the director concerned (if a shareholder) or those of any connected person.

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