When incorporating a company, you will need to appoint certain company officers. The type and amount of company officers required will depend on the type of company that has been incorporated. In this article we outline the two main officer positions, their responsibilities and when they are required before considering the role of other significant decision-makers, such as CEOs.
Company directors manage the company’s affairs by reference to the company’s articles of association (‘articles’). Under the Companies Act 2006, it is a requirement that private companies (such as private limited companies) have at least one director whilst public companies must have at least two directors. This applies irrespective of the size of the company and applies equally to all small businesses and startups that incorporate. One director within the company must be a natural person- that is an individual and not another company.
Anyone is capable of being a director of a company provided that they are over the age of 16 and are not bankrupt or disqualified by a court from holding a directorship. The Companies Act does not provide a procedure for the appointment of directors. Instead, the company’s articles of association will dictate how directors are appointed, which is typically by resolution of the members.
As a director, the individual or legal entity takes on duties to the company and is legally responsible for the company. The director’s primary duty is to act within their powers contained with the articles of association - the company’s constitution. The company’s articles will outline the directors’ duties and powers and it is important directors act with the company’s interests and within the powers ascribed to them as if they exceed their powers the related decisions may be reversed and the directors might have to compensate the company for any resulting financial losses.
Directors must act to promote the success of their company and, depending on the size of the organisation, they might be responsible for reporting how they have done so in an annual report. They should act in good faith for the benefit of the company and correspondingly for the benefit of its members as a whole. This duty extends to also considering the consequences of their actions on employees, third parties, the environment, the company’s reputation and its longer term interests.
Directors must also exercise independent judgement and they are expected to exercise reasonable care, skill and diligence in their role, acting like a reasonably diligent person with the general attributes that could reasonably be expected from another carrying our the director’s functions. This involves them avoiding conflicts of interests and obtaining personal benefits (whether directly or indirectly) from the decisions they take.
Keeping a record of decision-making processes is crucial and the minutes of board meetings serves this purpose, providing evidence of the actions the board of directors have taken and the reasoning behind them.
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Private companies are not required by statute to have a company secretary unless the articles require one. In contrast, public companies are required to have at least one company secretary.
The qualifications of the secretary depends primarily on the type of company that is incorporated. In the case of private companies, there are no requirements for the secretary to have any formal qualifications. However, a public company must have at least one secretary who:
- has held office of secretary in a public company for at least 3 of the 5 year before their appointment;
- is a person, from their experience of membership, who appears to be capable of discharging the functions of secretary;
- is a UK barrister, advocate or solicitor, and;
- is a member of one of the qualifying processional bodies provided, such as the Institute of Chartered Accountants in England and Wales.
A company secretary’s primary responsibility is to ensure the company’s administration is adequate. They will handle the company records, legal documents and management of administration and communication. They will also need to ensure compliance with corporate governance, financial regulations and the law.
Companies might also have senior executives known as ‘Chiefs’ of certain divisions: they are executive-level managers within the company who work together to ensure the company’s day-to-day development. Below we discuss the most common senior executives that you might find within a company.
Chief Executive Officer (CEO)
A CEO is often considered as the face of the company who overseas the company as a whole and connects the decisions of other senior executives. They typically advise and make major company decisions and will guide and direct the company.
Chief Financial Officer (CFO)
A CFO will work closely with the CEO to source and evaluate new business opportunities in consideration of the potential financial risks and benefits that might result from certain ventures.
Chief Technology Officer (CTO)
A CTO leads the company’s technological needs and developments. If the company is creating technology, they will be responsible for the operations of the technology team and the research and development required for the product.
Chief Operating Officer (COO)
A COO can be considered a type of human resource executive and ensures that the company’s daily operations are running effectively and smoothly. They are responsible for ensuring that day operations are effective through effective process and procedure.
Chief Marketing Officer (CMO)
A CMO manages the strategies for business growth and development. The role will cover areas such as marketing, PR, customer experience and messaging in order to encourage a company’s expansion.
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The opinions on this page are for general information purposes only and do not constitute legal advice on which you should rely.