NUR AFFIERA ALIA ASMA BINTI AHMAD SABRI

254317

Briefly explain as to these types of directors:

Cite a decided case for situation 3.

1. Executive
Executive director is the full time working director of the company. They have a higher
responsibility towards the organization. The company and its employees expect them to
be efficient and careful in all dealings.

2. Non-executive
Non-executive is a non- working director and they do not involve in the everyday
working of the company. They might take part in the planning or policy-making process.
They challenge the executive directors to come up with decisions and solutions that are in
the best interest of the company.

3. Independent

They are the ones who do not have any direct relationship with the company. Their
experience is their asset and gives expert advice to the board when required.

Qualifications to be an independent director:

 Must have expertise and experience

 Must be a person of integrity
 Should not be a promoter of the company or its subsidiaries
 Should have no relations (financial/personal) with the promoters, or directors of
the company
 Should not have been key managerial personnel of the company or any of its
holdings and subsidies
 Should not hold total voting power exceeding two percent in such company
NUR AFFIERA ALIA ASMA BINTI AHMAD SABRI
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4. Non-independent
Non-independent directors are also known as non-executive directors are the custodians
of the governance process. They are not involved in the day-to-day running of business
but monitor the executive activity and contribute to the development of strategy.

5. De jure / De facto
A de-facto director or director in fact is someone who acts as a director but who has not
been formally appointed. Meanwhile a person who has been formally appointed is known
as ‘de jure’ director or director in law. They are elected as a director in accordance with
the articles of association of the firm, and gives written consent to hold the office of a
director. They enjoy full rights and privileges of a director, and is held individually and
collectively liable for the acts and/or negligence of the firm.

Case of Smithton Ltd v Naggar and others [2014]

It was held that one of the key factors in determining whether someone was a de facto
director was whether that person was part of the corporate governance system of the
company and whether he assumed the status and function of a director so as to make
himself responsible as if he were a director. The judge also gave further guidance on the
matter, namely:

 That a job title will not be a deciding factor - the court will also look at what the
director actually did.
 It is not a defence to show that the director, in good faith, thought he was not
acting as a director. This question will be determined objectively. 
 Any acts done by the director should be looked at in the relevant context. 
 A relevant factor will be whether the company considered the individual to be a
director and held them out as such, and whether third parties considered the
individual to be a director.
NUR AFFIERA ALIA ASMA BINTI AHMAD SABRI
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 The fact that a person is consulted about directorial decisions, or their approval is
sought on such decisions, does not in general make them a director because they
are not making the decision.

6. Nominee Director
Shareholders, central government or third parties appoint the nominee director. Nominee
directors come on board when there is grave mismanagement or the board members
abuse their powers.