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Owners and directors of small-medium businesses often find themselves in the position of being shareholder, director / board member and executive manager of their business.

In such cases, it’s vital you take care when making decisions to do so in the correct role as the duties of shareholders, directors and executive management are very different.

Shareholders invest in a business for a profit. They appoint the board and set the broad parameters for the business but do not take part in the running of it, nor own the assets of the company.

The directors are tasked with setting the strategy for the business and overseeing it. They must ensure that they make decisions in the best interests of the company, not the shareholders. The board appoints the CEO to implement the strategy, acting as an oversight body.

The executive management (CEO, etc.) are responsible for implementing the strategy and the day-to-day running of the company. They are answerable to the board.

It is critical that for those occupying more than one of these roles any, and all, decisions must be taken with the correct optic. Muddying these can result in the business holding those breaching their defined roles personally responsible for losses and damages suffered.

 

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