What are the main differences between a Director and a Shareholder?
The most popular choice of company formation is a company that is Limited by Shares. For this type of registered company, you will need to have a Company Director and at least one Shareholder. A Company Director can also be a Shareholder, so you can fully incorporate a new company with just one person acting as both the Director and Shareholder.
How these two roles operate is of great importance to your new business, so it is handy to know exactly what responsibilities each role takes on. Here we will take a look at what each does and the differences between them.
Management and ownership roles
Technically, a shareholder owns the company, or at least part of it, depending on how many company shares they own. Each shareholder will be issued with share certificates to confirm their stake in the company.
A Company Director is the person that is tasked with the duties of managing the company. This means they will be responsible for the day to day running of the company and overseeing every aspect of it, from managing staff to ensuring profitability and steering the company in the right direction.
Normally, shareholders have no requirement to actually get themselves involved in the day to day running of the company, but depending on the structure of the company, they may or may not need to be present at shareholders meetings.
There are many thousands of Companies Limited by Shares that have very hands-off shareholders who simply invest their money into company shares for their portfolio without actually ever visiting the business site, or meeting the company directors.
You can set up and run your own limited company all by yourself and act as both company director and first shareholder. There are many thousands of solo entrepreneurs doing this right now in the UK, and they manage their businesses very well.
Many of them will get help running their company by hiring virtual office services, such as our Complete Virtual Office London, to take on the bulk of the necessary admin work while they focus of managing the company and taking it forward.
Directors and Shareholders decision making
Both the company director and the shareholder are allowed to make decisions for the company. Exactly what they can decide on should be clearly outlined within the Articles of Association. The details would have been drawn up as part of the Memorandum and Articles, which is a document that spells out the terms and conditions of the company. The company may also have a Shareholders Agreement in place where the exact duties and responsibilities of shareholders are outlined.
Are there any rules and restrictions?
To form a Company Limited by Shares, you will need at least one person to act as a Company Director. You can have as many directors as you like, and you can also start your company with just one director and add more further down the line.
You will also need at least one shareholder to register your company with. Again, you can start with just one shareholder or as many shareholders as you want. You can also sell more shares further down the line and take on more shareholders, or sell further company shares to existing shareholders.
A shareholder doesn’t necessarily have to be a human either. You can have corporate shareholders where another company may buy your company shares and own them in their company name. As a registered company is seen by the law as a single entity that is separate from its owners and directors, a company is able to purchase shares in other companies just as an individual person can.
When you first register your company with Companies House, the identity of the first shareholder or shareholders will be known as Subscribers. This means that in years to come, even if the original shareholders cease to become shareholders, their names will always be on record in the details of the company formation.
There are also a few important changes to businesses that you may want to learn about before you create your new company.
Limited by Guarantee Companies
While Limited by Guarantee companies don’t carry any shareholders, they do have members that act like shareholders in the company. The main difference is that members will agree to contribute a specific amount of money to the company. Usually, this is as little as £1.00, but the exact amount can be agreed upon in advance of the formation.
Just like Companies Limited by Shares, Limited by Guarantee companies can have as many company directors and members as they choose. Again, a company director can also be a company member.
For a registered partnership (LLP), there will be a need for at least two partners to set up the company, but members can also be a real person or another company. Again, there are no limits to how many members a partnership can take on.
Whether you are looking to set up a Company Limited by Shares, a Company Limited by Guarantee, or a Partnership (LLP), the directors, shareholders or members do not need to be UK residents.
Registering your Company Limited by Shares
When you form your company, you will need to submit certain director and shareholder details to Companies House so that they can register your company and add your information to the Register of Companies. Here is what you will need to submit:
Directors information (for each director you are registering your company with): Full name, date of birth, nationality, occupation, country of residence, residential address and service address.
For each Shareholder you register with, you will need: Full name, address, share information including share currency, share class – such as Ordinary, Preference, Redeemable, number of shares they hold, value per share, and some personal identification security ID.
For a Corporate Shareholder, your registration will need: Company name, director name, and the same share information as listed above.
Be aware that all company directors, shareholders and member information, including their registered addresses, will be entered into the Public Register of Companies, which is on public display and can be searched by anyone.
If you are wanting to set up your company and run it from your home address, this means that your private residential address will be on public display. This means that you could open up your home to cold callers and salespeople. You can choose to protect your home address and keep it off the public record by using a business address service, such as our Directors Service Address London, to use instead.
If you need any further information about how to use our business address services for your registered company, do not hesitate to contact us. We are here to help!
Call us 0207 566 3939