What is the difference between a director and shareholder?

What is a director?

A director is someone that manages and controls the operations of a company. They ensure the company operates at the highest possible standards and complies with the relevant legislation. The director is appointed by the shareholders (owners) of a company. In most cases, the director is also a shareholder of the company. There can be more than one director.

 A director has many responsibilities and legal obligations to uphold, including:

  • Keeping records and registers
  • Paying the annual review fee
  • Corporate governance
  • Active communication with managers and staff
  • Ensuring financial data is up-to-date
  • Explain the company’s financial position and performance

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What are members/shareholders?   

Shareholders are the owners of a company. They can be a person, corporate body or a body politic. A Pty Ltd company must have at least one shareholder but no more than fifty. Ownership of the company is split by the amount of shares that you receive. As a shareholder, you are not personally liable for the company’s debts. Shareholders make decisions by passing resolutions in the company meetings.

 

Share Class

Share classes are used to assign different rights to shareholders. The two main types are ordinary and preferential. Ordinary shares are the most popular and give you the basic rights as set out in the Corporations Act 2001.

 

Number of Shares

The number of shares that you choose should reflect the ownership of the company. For example if there are 100 shares issued and two individuals hold 50 shares, they each own 50% of the company. Most companies typically choose between 1-100 shares.

 

Amount paid per share

In addition to choosing the number of shares in your company, you must also set the price of each share. This price represents the limit of the shareholders legal obligation to pay the debts of the company. For example, if you had 100 shares valued at $1 each, you would only be obligated to pay up to $100 if your company were to go bankrupt. It is fairly typical that company shares are initially priced between 1c and $1.  

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