With respect to a company, a director is an officer of the company who is the person who is in charge of maintaining control of the conduct and management of the affairs of the company. All of the company’s directors are collectively known as the board of directors and it is customary for the board of directors to appoint one of its members to act as chairman of the board.
In theory, the company is controlled by two bodies, the board of directors and the shareholders. In practice, however, it is the type of company that controls the amount of power wielded by the board of directors, and in small private companies the directors and shareholders are usually the same entities, so there is hardly any division of power. In the case of large publicly traded companies, the board of directors has the paramount role in most situations with individual responsibility and management usually delegated to professional CEOs who are responsible for particular areas related to different operations of the business. .
In the case of large public companies, the board of directors usually has the last word. In general, it is difficult to overcome voting blocks due to the large number of shareholders involved and also due to the practice of institutional shareholders, such as banks and pension funds, granting powers to the board of directors to vote their shares at meetings. general, which influences how the company should work.
The board of directors is the result of an incremental legal history and was, until the end of the 19th century, thought of as an agent of the company that acted under the control of the shareholders in general assembly. In most business settings, directors are appointed and removed through a voting system conducted by the company’s shareholders at a general meeting. The directors can resign or, in the event of death, be replaced by another and can also be removed from office with the approval of a resolution of the remaining directors. In reality, it can often be quite difficult to remove a director by passing a resolution. A good set of board forms would surely contain a template for voting for a new board member.
The board of directors may exercise its powers at meetings and most bylaws allow sufficient notice to be given to all directors of these meetings. A quorum must be present before conducting company business. Since directors exercise both control and direction of the corporation’s affairs and corporations are managed for the benefit of shareholders, there are laws that impose strict duties on directors with respect to the exercise of their duties. The duties imposed on directors are known as fiduciary duties and are very similar to those imposed by law on other similar positions of trust, such as those imposed on agents or trustees.
The functions of the members of the board of directors are committed to the company and not to any other body. Furthermore, members of the board of directors must act honestly, do so in good faith, and like directors they must act in what they consider to be the best interest of the company. Also, directors have to exercise their powers for a proper purpose. In most cases, an improper purpose will be readily apparent and may include instances such as directors acting to enhance their own nests or acting in a manner detrimental to the best interests of the company and more for personal gain or benefit.
Directors must also not act without obtaining the consent of the company, which limits their discretion in relation to the exercise of their powers and must not force them to vote in a certain way at future board meetings. As a trustee, the directors cannot put themselves in a position where there is a conflict of interest between their own interests and the duties they owe to the company. In addition, directors may not use company opportunities and information for personal gain.
The members of the board of directors may not compete directly with the company without this resulting in a conflict of interest. In case of breach of duties, the law allows some remedies such as precautionary or declaratory measures, damages or compensation, restitution of the company’s property, termination of the respective contract, profit account and also summary dismissal.