Company Directors in the US and the UK

Company Directors in the US and the UK

Although companies in both the United States and the United Kingdom have “directors,” the roles in each country are different and are subject to different regimes.

First, the similarities. In both the US and the UK, the directors are appointed (and removed) by the shareholders. In addition, in both countries, directors owe duties which – although formulated in slightly different terms – require the directors both to act in the interests of the company and its shareholders and to make informed, deliberative decisions.

However, there are many significant differences between how US and UK directors operate. Here are some of them:

1. Day-to-Day Management. In the UK, the company’s management is typically conducted by its directors, who are intricately involved in the day-to-day management of the company. In the US, officers – not directors – manage the day-to-day affairs of the company. The US directors’ role is to provide general oversight and to form corporate policy. In the US, the officers are determined by the directors and corporate bylaws. They often include such positions as President, CEO, Secretary, Treasurer, or CFO. US officers are similar to executive directors in the UK, with US directors serving roles more analogous to non-executive directors in the UK.

2. Governing Law. In the UK, directors’ duties and responsibilities are governed by uniform laws, largely set forth in Companies Act 2006. In the US, the law of the state of incorporation governs the internal affairs of the company, including the duties and responsibilities of its directors. For this reason, many companies – particularly publicly traded companies – choose jurisdictions (like Delaware) that have laws intended to shield directors from liability.

3. Directors’ Liability and Indemnification. In the UK, provisions that shield directors from liability for negligence, breach of duty, or breach of trust are largely unenforceable, as are many indemnification provisions which require indemnification of directors for such conduct. In the US, it is common for incorporating documents to include a provision eliminating the personal liability of directors for monetary damages in cases other than those involving bad faith or a breach of loyalty. It is also common for a US corporation to fully indemnify its directors for judgments and expenses under certain circumstances. Both provisions are generally enforceable under the laws of the various US states.

4. Disclosure. In the UK, the identity of a corporation’s directors is publicly available at Companies House. In the US, very few states require disclosure of the identity of directors (or officers).

5. Disqualification. In the UK, the Company Directors Disqualification Act permits disqualification of a person from acting as a director for a period of 2 to 15 years for certain types of misconduct. Consistent with the US view that corporations are private entities which should be largely autonomous, no such provision for disqualification exists in the US.