Issue link: https://htpgraphics.uberflip.com/i/116729
Shareholders and Directors Section 4 Executive and Non-Executive Directors The members of the board of directors will comprise a mix of executive and non-executive directors. An early stage spin-out may have more non-executive directors than executive directors. The opposite will tend to be the case for later stage companies. The executive directors will hold a specific role and have a key function in terms of the management of the company, such as that of Managing Director (sometimes called the Chief Executive), Finance Director, Operations Director, Technical Director and Sales Director. However, they are required to act in a strategic and overall capacity when contributing at board sessions. As a director, you are also expected to deal with areas outside your operational/functional responsibilities on these occasions. The executive directors will usually have service contracts which will set out the terms on which they are employed by the company such as the period of notice and salary. At least one non-executive director may be appointed by the Investor backing the spin-out (often referred to as the Investor Director or Institutional Director). This could be someone who is not employed by the Investor, but someone who is chosen for their relevant expertise to complement the other directors. In general such an appointment is termed a Nominee Directorship. Non-executive directors do not have a specific management role within the company but generally have a good deal of commercial experience and so can provide general skill, advice and external contacts and networks to the board. Non-executives do, however, owe the same duties to the company as executive directors. They are expected to carry out their functions with skill and care and owe the same range of fiduciary duties to the company as executive directors. The statutory provisions that apply to directors make no distinction between executives and non-executives. The non-executives will usually have a letter of appointment setting out their role and payments. Non-executive directors will often be active in dealing with matters such as audit reviews and remuneration so that they can bring independent judgement to some of the company's key areas. Usually the Chairman of the Board will be drawn from the non-executive directors and ideally this is a role not to be combined with that of a Managing Director, in order to provide balance and objectivity in the leadership of the company. 22