Director and shareholder what’s the difference?

20th November 2024

You’ve decided it’s time to register a limited company and now you’re being asked for director and shareholders details, but who should you appoint and what is the difference?

In a nutshell the shareholders of a company are the people or corporations who own the company. While the director is appointed by the shareholders to manage the business and day to day operations of the company.

What is a shareholder?

  A shareholder is a person or corporation which owns a stake in the company. The nature of control and percent of ownership of the company depend on the number, value and class of shares held.   Although shareholders are not always involved in the day to day running of a company, they do however have the ultimate control over decision making. They also hold the ability to appoint or remove a director depending on their voting right associated with their shares.   They can also receive payments from the company’s profits in the form of dividends. The allocation of dividends will also be based on the shares held by the shareholder.    

What is a director?

  A company director is a requirement when forming a UK private limited company. Although you can have a corporation as a director, at least one individual person must be appointed. The director must be over the age of 16 and is appointed by the shareholders.   The director is required to keep the company up to date on all statutory requirements, including filing with Companies House and HMRC and are responsible for running a lawful and ethical business.   A director can also be a company employee and can receive a salary through the company.  

What if I’m the only person in my business?

  As a one-man band you are probably used to acting in many roles within your business. When you become a limited company, this will extend to including the roles of both a shareholder and director. This means you are both the owner of the business and appointed business manager.   As a director can be an employee of the company, this has the added benefit of allowing you to take a wage through the company while topping up your pay by taking dividends from the company profit.   At any time, you can bring in new directors or shareholders, allowing you to grow your business.  

We hope this has helped simplify the differences between a shareholder and director. If you need more information on registering a limited company or to discuss growing your business in this way, please feel free to call us on 02392 592147.