What’s the Difference Between Shareholders and Directors?

Whilst a shareholder and company director can be the same person, the two roles do have pretty clear distinctions. That said, a director doesn’t have to be a shareholder, and shareholders don’t need to be directors. So what’s what?

What is a shareholder?

A shareholder can be thought of as a ‘member’ of a company. These members take at least one share in a limited company, representing a percentage of the business. This usually means that they also share a portion of any profits, in the form of dividends. Shareholders don’t always receive the amount, depending on how many shares they own, and what type.

Owning shares can also give shareholders voting rights on company decisions. Rather than the day-to-day stuff, these votes tend to be about exceptional matters such as:

Changing the nature of the business
Issuing shares
Appointing or removing a director
Approving directors’ loans

What is a director?

The role of a director is usually much more hands-on with the day-to-day running of the business. Company directors also have far more responsibilities to the business than shareholders do. It’s their job to manage the company effectively, and make sure it complies with the law whilst benefitting its shareholders.

Typical responsibilities a director will take care of include:

Employing and managing staff
Managing payroll
Registering for and paying VAT
Submitting the company tax return and paying Corporation Tax
Organising shareholder meetings, and other administrative tasks relating to shareholders

More information about a directors’ official duties are in sections 171 to 177 of the Companies Act 2006.

The difference between shareholders and directors

While the directors take care of the general day-to-day running of a company, shareholders can still have a significant say, especially when it comes to any of large decisions a director may take. In simple terms:

Shareholders own (part of) the company
Directors manage the company!

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About The Author

Christopher Jones

Forensics graduate-turned copywriter and blogger. I love turning complex topics into easy to understand, yet engaging pieces of content.