What are the differences between a Director and a Shareholder?

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When incorporating a Limited by Shares company you will need a Director and a Shareholder. Both are pivotal to the general running of the company with the differences depending on the company type; Limited by Shares, Limited Liability Partnership (LLP) or Limited by Guarantee. We know it can be confusing when setting up a company, so we have written this handy post that covers the differences between these two roles and everything else you need to know.

Before we get started, it’s important to know that you can incorporate a company with just one person acting as the Director and Shareholder.

What are the roles of a Director and Shareholder?

While a Shareholder owns the company (as they hold shares and get a Share Certificate to say so), the Director does the general managing of the company itself.

As Directors effectively run the company, Shareholders don’t always need to be present at meetings, however, this can differ between companies.

Both roles have authority to make certain decisions in the company, with most powers being dictated by the Articles of Association (part of the Memorandum and Articles, a document that outlines the terms and conditions of the company) or a Shareholders Agreement if you have one.

All of our Limited by Shares and Limited by Guarantee company formations come with a standard Memorandum and Articles template that can be downloaded and edited to allow for any adjustments, while the Limited Liability Partnership (LLP) package includes an LLP agreement which governs the members (see below) involved.

The members in a Limited by Guarantee act in place of a shareholder, as there is no share capital, while the member in a Limited Liability Partnership adheres to responsibilities in the company.

Are there any restrictions?

Whilst you will need at least one person as a Director for a Limited by Shares company, you can have either a corporate (company) or human Shareholder, with no restrictions on the number of Directors and Shareholders you can have.

It should be noted that the first Shareholders are known as Subscribers, and will always be visible as a Shareholder at the time of incorporation, even if they cease to be a Shareholder.

Limited by Guarantee companies don’t have any shareholders but instead have members who agree to contribute money (usually £1 but this can be amended) should the company need it. Again, there is no limit on appointments and one person can be both Director and Member.

For an LLP, there would need to be a minimum of 2 Members or ‘Partners’, but a Member can be a person or a company, known as a ‘Corporate Member’. There is no limit on how many Members can be involved.

For all the company types mentioned, neither Directors or Shareholders (or Members) need to be UK residents.

What information is needed when appointing a Director and Shareholder?

The following information is required for each Director:

  • Full name, date of birth, nationality, occupation, country of residence, residential address and service address (the director’s ‘official’ address – this can be the same as the registered office).

For a Corporate Director you will need:

  • Company name, the full name of the company Director, company’s address, EEA or Non-EEA (whether the company is registered in the European Union or not), the country where the company was registered and registration number. If the company is non-EEA you also need Governing Law (the law that the company being appointed operates under) and Legal Form (is it an LTD, LLP, PLC or LLC?).

For a Shareholder you need:

  • Full name, address, share information including share currency (GBP, EUR, USD), share class (Ordinary, Preference, Redeemable), number of shares, value per share and 3 security question answers for an online signature (ie. first 3 letters of town of birth, last 3 digits of telephone number and first 3 letters of eye colour).

For a Corporate Shareholder you need:

  • Company name, director name, and all the above share information.

Does Director and Shareholder information appear on the public register?

Yes, all Director, Shareholder and Member information will appear on the public record (apart from the Director’s residential address). You can use our service address service if you would like to keep the service addresses private.

Can I appoint more Directors and Shareholders in the future?

Yes. Directors can be appointed and resigned at any time from our secretarial system, or via paper forms (AP01 or TM01) through Companies House directly.

More shares can be added (SH01) or transferred (J30 Stock Transfer) through our share transfer services or via Companies House directly (please note that a Confirmation Statement would need to be filed in order for changes to be reflected online).

Adding new Members to Limited by Guarantee or LLP companies can be done via an internal company document. We recommend contacting Companies House or a business advisor for more information.

There you have it, the differences between a Director and a Shareholder. We hope this post has answered any questions you had. If you do have any further questions or queries you can visit our support page for more information, or give us a call on 0207 608 5500.

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