A limited company shareholder is an owner of a company. A limited company director is appointed by shareholders to manage the business on their behalf. Although the roles are completely different and separate, one person can assume both positions. Alternatively, lots of different people can take on these roles.
To set up a limited by shares company, it must be incorporated at Companies House. You will need at least one shareholder, one director and one issued share. However, you can also register a company with multiple shareholders, directors and shares.
The difference between directors and shareholders
- Also known as company officers.
- Can be a natural person (human) or a corporate body.
- Must always be at least one human director in a company.
- Minimum age requirement of 16.
- Can also be shareholders.
- Appointed by the shareholders.
- Responsible for managing a company lawfully and ethically in accordance with the Companies Act 2006 and the Articles of Association.
- Required to run the business within their powers granted in the articles.
- Expected to promote the success of the business with a view to making a profit for the benefit of the company and its shareholders.
- Receive a salary (and dividend payments where applicable if also a shareholder).
- Their rights and powers are determined by the shareholders.
- Legally responsible for filing true and fair annual accounts, Annual Returns, and Company Tax Returns by the statutory deadlines.
- Ensuring all required company taxes are paid on time.
- Can be removed and disqualified if they are incompetent, display ‘unfit’ conduct or breach their contract in any way.
- Can be held personally liable and prosecuted if they fail to uphold their legal responsibilities and duties.
- Normally authorised to issue and transfer shares, but it depends on the powers they are granted in the Articles of Association.
- Also known as members. The first shareholders are known as subscribers.
- Can be a natural person or a corporate body.
- Own some or all of a company through shares.
- Liability is limited to the nominal value of their shares. If the company gets into debt, they are only responsible for the value of their shares.
- Can also be directors if not otherwise prohibited.
- Receive a portion of the profits in relation to their shareholdings.
- Not involved with everyday business activities and management, unless they are also directors.
- Have the power to appoint and remove directors and company secretaries.
- Can choose what powers and rights the company directors have.
- Proportion of ownership depends on the number, value and class of shares held.
- Their voting rights, capital rights and dividend rights depend on the Prescribed Particulars attached to their shares.
- Make decisions about significant issues such as changing the company name or structure, investment opportunities, issuing shares, appointing an auditor to inspect the accounts, appointing or removing a director, changing a director’s powers, and changing the Articles of Association or Shareholders’ Agreement.
- Normally have a right to any surplus capital if the company is wound up (if Articles permit).
If a company is owned and managed by a sole director and shareholder, one person alone will have all of these rights and responsibilities. It is important to be aware of these requirements and obligations before committing to limited company formation.