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l An undischarged bankrupt, unless her or his appointment is approved by the court;
l One disqualified by court order;
l The company’s auditor.
There is no legal or statutory definition about executive and non-executive directors, as we know, they are all appointed by the board. Executive directors are those who, in addition to their roles as directors hold some executive or managerial position. They are company employees, and they are required to be involved in the day-to-day management of the company. They have no right under the Articles to remuneration, notice or compensation for loss of office but they have the same rights as other employees under the employment legislation provided they receive a salary. They should therefore be employed under a service contract setting out their terms and conditions of employment.
On the other hand, a person with financial, legal or technical expertise can be appointed non-executive director. Professor Saleem Sheikh defined NED as: “those independent directors who, unlike executive directors, do not hold any executive or management position in the company in addition to their role as a member of the board, but who are subject to all the duties applicable to executive directors that are established by law.”[7] Unlike executive directors, NEDs are expected to do little or nothing other than to attend a reasonable number of board meeting and, perhaps, some of the committees that the board may establish.[8] It should be noticed that unlike executive directors, non-executives are not employees of the company, and are not expected to devote their full time and attention to the company. Their legal position is not restrained by contracts of employment or service agreements and they are likely to have no mandate or signing powers for the company.[9]
III. Directors’ duties
The law imposes duties on directors. If a person does not comply with his duties as a director he may be liable to civil or criminal proceedings and he may be disqualified from acting as a director. A director is a constitutional monarch bound by the terms of the company’s charter set out in the Memorandum and Articles.
A. the development of directors’ duties
The law on directors’ duties has developed slowly over about 150 years.[10] It is often stated that directors are trustees and that the nature of their duties can be explained on this basis. Prior to 1844 most joint stock companies were unincorporated and depended for their validity on a deed of settlement vesting the property of the company in trustee. [11] There, the director’s role is to protect and preserve the asserts for the beneficiary.
With directors of incorporated companies the description “trustees” was less apposite but it was not unnatural that the courts should extend it to them by analogy. [12] Someone thinks the directors are agents of the company rather than trustee of it or its property. However, in the UK there have been attempts to solve the problem by drawing heavily and easily on pre-existing concepts of the law of trusts and, until recent years, largely ignoring the challenges posed by the entrepreneurial function.[13] As a result this area of law was split between the courts of common law and Chancery, the directors’ duties fall into two aspects: common law duties of care and skill and fiduciary duties.
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