Private Limited Company is the company structure that is formed with minimum 2 members and maximum 200 members. Minimum 2 directors and 2 Shareholders are required to start the private limited company. However, the same persons can act as both shareholders and the directors of the company if they desire so. To simply state we can say that the shareholders are the owners of the company whereas the directors are just the managers of the company. As the position of the director and the shareholder are distinct their roles and responsibilities are also different. In this article we will understand the difference between roles of the shareholder and director in a company.
Who are the Directors and what is their responsibility?
Directors are the person appointed by the board of directors or the shareholders for managing the affairs of the company. They are conferred with multiple rights and responsibilities according to the companies Act 2013. There are Independent also executive directors and the non-executive directors in a company. The directors of the company are required to look into the matters of the company and take various decisions for it. There are number of matters that needs to be taken by the board of directors meeting and the resolution must be passed in this regard. Below are some of the decisions that needs to be taken by the board of directors-
- The decisions regarding the general working of the company.
- The decisions regarding forming the business relationships with third parties and coming into legally binding contracts with them.
- The directors are required to provide the approval for the change in the registered office address.
- The board of directors can appoint the directors for the term of less than 2 years.
All the decisions in the board meeting are taken by passing the resolution based on the votes of majority of board members. After passing the necessary resolution the board of members shall ensure to take necessary steps to implement the decisions taken.
Who are shareholders and what is their responsibility?
Unlike the directors of the company shareholders of the company are the members or the owners of the company. There are some major roles and rights of the shareholders that they need to perform being owners of the company. Here we have listed out some of the major roles of shareholders in the private limited company.
- For making changes in the article of association shareholders approval are mandatory.
- Authorizing the directors to issue addition shares.
- Changing the name of the company.
- For issuing the bonus shares.
- Stating the shareholder pre-exemptions rights.
The shareholders are required to conduct the general meeting of all members and take the decisions. Just like in case of the board of directors the decisions in the general meeting are taken based on the majority of votes with the chairman having the casting vote in case of equality of votes.
Thus, the roles and responsibilities of the members and directors are completely different from each other. At the time of getting the private limited company registration it is the choice of the owner to get separate directors and shareholders of the company or not. However, if your company is on large scale then it is highly recommended for you to appoint an Director.