Director rights / responsibilities

A

ali

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Can anyone advise on the relevant roles / rights / responsibilities for a director (non shareholder) being added to a company of which there are two existing director both of whom are shareholders.

Possible to give an idea in a nutshell of accepting / declining such an offer?

Thanks,

A.
 
An overview of directors responsibilities can be seen here [broken link removed]

In respect to directors you are as a non shareholder no different to any other director unless there is specific in place about voting rights on the board. The directors are entrusted by shareholders to run the company and even though they may be the same people the tasks don't cross. However in practical terms in small companies they often do. In your case the board is split 50/50 so you may be called in by one side or the other to vote with a particular resolution. Personally I would be not be happy with a directorship in a SME which did not involve a stake or recompense. If all goes belly up you will have the same grief as other the directors. So in answering your question it depends on the business and the stability of same and what is also in it for you. Naturally as a director you will be entitled to examine the books and judge the status of the company and you can of course resign at any time if you feel uncomfortable.
 
Thanks so much. Can I confirm that a non shareholding director would be as responsible
For debts and liabilities as the others? Any other pitfalls?
 
Time said:
Directors are not GENERALLY responsible for the debts of the company.
Click to expand...


Sections 297 and 297A of the 1990 Companies Act.
Section 297A provides that specified persons are to be personally responsible without limitation of liability for all or part of a company’s debts or liabilities in defined circumstances.

Section 297 can arise anytime in solvent or insolvent companies imposing criminal liability on persons found guilty of fraudulent trading. Before the 1990 Act personal liability for the debts of a company could only be imposed on directors where fraud was proven.

If in the course of winding up or examinership, or if the court makes an order pursuant to section 251 of the Companies Act 1990, it appears that an officer was knowingly a party to the carrying on of the business of the company in a reckless manner or any person was knowingly a party to the carrying on of the business of the company with the intent to defraud the creditors of the company or the creditors of any other person or for any fraudulent purpose, then that officer or person may be held personally liable for the debts of the company.

An officer will be regarded as being knowingly party to such conduct, if; having regard to the general knowledge, skill and experience he might be expected to have, he ought to have known that his actions or the company’s actions would cause loss to the creditors or if he was party to the contracting of a debt and did not honestly believe on reasonable grounds that the company would be able to pay the debt when it fell due along with its other debts.

If a company fails to keep proper books of account and the failure is regarded by the court as having contributed to its inability to pay its debts or as having resulted in substantial uncertainty as to the assets and liabilities of the company or as having impeded the winding up then officers and former officers responsible for the default maybe made personally liable for the company’s debts. Need not be on a winding up. When an application is made in respect of alleged reckless trading, the order can only be made where the company is deemed to be unable to pay its debts.
 
Very much appreciate the detailed replies. Other option on the table is
Profit sharing arrangement without director status. Other two directors are a married.couple which.also concerns me re the imbalance
 
Director status is worth nothing to you unless you are getting paid. It does bring duties and rights though which you need to be aware of.
Profit sharing or a fee based on what you are bringing to the table should be the way to go.
Taking a minority stake in a company can in practice often be very difficult to exit from satisfactorily.
 
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