Introduction
A corporate director is a term used to describe a company, firm, or any other kind of corporate body that is appointed as the director of another company. A private company can appoint as many corporate directors as it wishes during or after company formation, provided there is always at least one appointed human director.
What are the reasons for appointing a Corporate Director?
A Corporate Director, serving on a company’s board, oversees strategic direction and governance. They would be involved in major decisions, such as setting policies and long-term strategies.
Are there any restrictions on Corporate Directors?
The role of a corporate director is identical to any other director. An authorised person must act on behalf of the corporate director to fulfil the responsibilities.
New restrictions on the use of corporate directors were introduced in the Economic Crime and Corporate Transparency Act 2023. The legislation means that companies will only be permitted to appoint UK corporate entities with ‘legal personality’ as corporate directors.
The date of implementation has yet to be announced. However, once the new rules come into force, existing companies with corporate directors will have 12 months to comply.
What are the benefits?
There are advantages to appointing corporate directors, especially when a company is newly established.
- The expertise, support, and guidance of a well-known corporation can be extremely beneficial to a company that is just starting out.
- It can make a relatively unknown business more appealing and credible to consumers, suppliers, investors, and lenders.
What are the disadvantages?
The director’s reputation is closely tied to the company’s performance and conduct. Any negative publicity or scandals associated with the organization can impact your personal brand.
Frequently Asked Questions
Company directors are often employees but, often, they are not. Their employment status depends entirely on individual circumstances. By default, directors are known as ‘office holders’ (along with company secretaries).
Many companies choose to give their senior employees or long-serving employees the title of “Director” even though they are not registered company directors for the purposes of the Companies Act 2006.
The title of director should only be used when dealing with a company (corporate entity). If you own a business as sole trader, then you should call yourself the owner.
Directors are not just those who are registered as directors at Companies House. They are anyone who acts as a director, whether they are called directors or not. They include directors who have been appointed by the company but never properly registered.
There is some confusion between being the owner of a business and being a director. Shareholders and directors hold two very different roles in a company. Shareholders own the company by owning its shares and are often referred to as ‘members’. Directors, on the other hand, manage the business and its operations
Useful Links
- https://www.iod.com
- Institute of Directors: https://youtu.be/du48Ae9STw4?feature=shared
- ie-guide-to-directors-responsibility-and-risk.pdf (kpmg.com)