Appointing and paying company directors
Dealing with company directorial appointments and deciding on how to pay them.
The details of the appointment of company directors are typically set out in a company's articles of association - see memorandum and articles of association. These may impose restrictions on, for example, the number of directors or the length of their service.
If your business's articles do not cover directorial appointments, you should nevertheless have written procedures for appointing company directors.
You also need to comply with certain legal requirements when making appointments and check that the candidate is not a disqualified director. .
It is considered best practice to involve all existing directors in the appointment of any new company directors, although some businesses set up nomination committees to handle this.
Large shareholders, particularly venture capitalists, may demand board representation in return for investment. They usually take a non-executive position, and can provide plenty of advice based on their experience with growing businesses.
Paying company directors
The issue of remuneration needs to be handled carefully. Clearly, each director's level of experience will be a factor in deciding their rate of pay. Executive directors receive a salary, while non-executive directors may receive a salary if employed or receive fees if self-employed.
You may decide to include shares, share options, pension provision, company cars, or incentive schemes in directors' remuneration packages. For information on remuneration, see how to set the right pay rates and implement staff incentive schemes. You will need to consider the tax implications of these types of remuneration.
It is considered good practice to have executive directors' pay decided by the non-executive directors to avoid any conflict of interest.