As your company grows, you will likely onboard a CEO, a CFO, and deal with shareholders. Understanding each person’s roles and responsibilities is crucial to developing a solid team that will benefit your business. This article steps through the key players in a company and their role. While your business may not employ all these people, it is prudent to know how they affect day-to-day operations.
What is a Shareholder or a Member?
Shareholders or company members essentially own the company, and are key players in the company. They provide money to the business in return for part ownership. You can interchangeably refer to a shareholder as a ‘member’. Additionally, shareholders are entitled to a return on their investment in the form of dividends.
Depending on the class of shares the shareholder or member holds in the company, shareholders may have the right to vote on matters concerning the management and direction of the company’s growth. Therefore, it is crucial to consider voting rights when bringing on investors to your company. If you want to maintain control of your company, you will need to control the majority vote.
Further, there are a few key differences between majority and minority shareholders that you should note:
| Majority Shareholder | Minority Shareholder |
| A majority shareholder is a shareholder who owns more than 51% of the shares of a company. Often, the majority shareholder is the founder of the company. By owning the majority share of the company, majority shareholders can influence the direction of the company and matters to be decided. They can often hold the deciding vote on shareholder decisions. | A minority shareholder is a member who owns less than 50% of the shares of a company. Minority shareholders could be friends and family, employees of your company, or external investors. Minority shareholders have less power than the majority shareholders in deciding the direction of a company. |
What is a Director?
A director is responsible for managing the company’s business affairs and making day to day decisions. Shareholders appoint a director to run the company. The company constitution and shareholders agreement will outline the role and responsibilities of a director. The Corporations Act 2001 (Cth) also prescribes the duties a director has to uphold in this position. If you have no company constitution, the replaceable rules in the Corporations Act apply to the role of directors in the running of the company.
When a person is acting as a director, they must act in the company’s best interests. This is where there may be a conflict between the director’s personal interests and those of the company. If there is more than one director, the directors collectively make up the ‘Board of Directors.’
Critically, if you act as a company director but have not been formally appointed, you may be a shadow director, and the above duties will apply.
Continue reading this article below the formWhat is a Chairperson?
A company may have more than one director. In this case, directors are known as a board of directors. The company’s board of directors chooses a chairperson to oversee and preside over board meetings. His or her job is to ensure that the meetings run efficiently and in an orderly fashion. Further, some companies may decide that if there is a deadlock (i.e. the board cannot reach a decision on a particular matter), the chairperson will have the deciding vote.
What is a Company Secretary?
Not all types of companies need to have a company secretary. However, if your company does have a company secretary, then some of the tasks they may be responsible for include:
- administering the affairs of the company and the business of the board;
- advising the board of directors on the best practice corporate governance requirements for the company;
- having familiarity with the director’s duties under the law;
- attending to all board reporting; and
- other registration and document obligations.
What is a CEO?
The CEO or Chief Executive Officer is the highest-ranking executive in a company. Although typically one of the company’s founders and a director, they do not necessarily have to hold either of these positions. Their primary responsibilities include developing strategies, managing operations and communicating with the board. In some cases, the CEO is also the chairperson of the company.
What is a CFO?
A Chief Financial Officer is responsible for overseeing the company’s financial activities, including:
- financial planning;
- budgeting;
- monitoring cash flow; and
- looking at the company’s financial figures.
They assess the company’s financial position and offer advice to the board of directors on any changes they consider the company should make to strengthen its financial position. They are similar to a treasurer and are responsible for the accounting and finance departments.
Key Takeaways
With any successful company, there are many key players and responsibilities that must be fulfilled. The key to a functioning business is understanding the roles of key players and how they work to enhance the company. To avoid confusion, it is best practice to clearly define certain roles through a company constitution or shareholders agreement. For more information on your company’s corporate structure or assistance in drafting a company constitution, contact LegalVision’s business lawyers on 1300 544 755 or fill out the form on this page.
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