Appointing a director is a governance decision, not just a filing. You decide what kind of director to appoint, check the candidate’s eligibility, follow your articles’ appointment process, document a service contract or letter of appointment, and notify Companies House within 14 days. The new director takes on statutory and fiduciary duties from day one.
This guide covers the types of UK director, the formal appointment process, eligibility checks, service contract essentials, and onboarding.
Types of director
UK company law recognises several categories of director, each with different roles and (in some cases) different legal definitions.
Executive director
A director who is also an employee, with day-to-day operational responsibility — typically the CEO, CFO, COO, or specific functional head. Executive directors usually have service contracts and are paid through PAYE.
Non-executive director (NED)
A director who provides independent oversight without day-to-day management responsibility. NEDs typically attend board meetings, sit on committees (audit, remuneration, nominations), and bring external perspective. NEDs are usually paid via a letter of appointment with a fixed annual fee, not under a service contract.
Shadow director
A person in accordance with whose directions or instructions the directors of a company are accustomed to act, even though not formally appointed. Shadow directors are subject to most of the same statutory duties as formally appointed directors. The category catches founder-investors, controlling shareholders, and parent-company executives who direct operations.
De facto director
A person who acts as a director without formal appointment. The court looks at substance, not form — if someone acts as if they were a director, the law often treats them as one. The leading case (Re Hydrodam (Corby) Ltd [1994]) confirmed that de facto directors are subject to directors’ duties and disqualification provisions.
Alternate director
An alternate director acts as a substitute for a director who cannot attend a meeting. Alternates are allowed only if the articles permit, and they take on full directors’ duties when acting.
Nominee director
A director appointed by a shareholder, lender, or other stakeholder to represent that party’s interests. Nominee directors still owe their statutory duties to the company, not to the appointer — the duty under section 172 is to promote the success of the company, regardless of who put them on the board.
Appointment process overview
The mechanics depend on your articles.
- Model articles (the default for most modern private companies) allow directors to be appointed by an ordinary resolution of shareholders or by a decision of the directors. Either route is valid.
- Bespoke articles may impose additional requirements: shareholder consent, supermajority, specific class consents, or appointment under a shareholders’ agreement.
For most small companies, the appointment is by a board decision documented in minutes. Larger companies and those with significant external investors more often require shareholder approval as a governance discipline.
For step-by-step Companies House mechanics including the AP01 filing, see how to add a director to a limited company.
Director eligibility
The statutory eligibility rules:
- Minimum age 16 (Companies Act 2006 s.157)
- Not currently disqualified under the Company Directors Disqualification Act 1986
- Not an undischarged bankrupt
- Not the company’s auditor
Sector-specific fitness rules apply on top in regulated industries. Directors of FCA-authorised firms must pass approved-person regimes (SMCR). Directors of care homes must meet CQC fit-and-proper-person tests. Directors of schools and academies must pass DBS checks.
Identity verification under the Economic Crime and Corporate Transparency Act 2023 became compulsory for new directors during the 2025–2026 rollout.
Service contracts and remuneration
For executive directors, draft a service contract that covers:
- Role and reporting line
- Salary, bonus, and benefits
- Pension and equity entitlements
- Working hours and place of work
- Notice period (typically 3 to 12 months for senior directors)
- Restrictive covenants — non-compete, non-solicitation, non-dealing — drafted to be enforceable. Excessively wide covenants are routinely unenforceable in the UK.
- Confidentiality and IP assignment
- Termination provisions, including for cause
Section 188 of Companies Act 2006 requires shareholder approval for service contracts longer than two years. Many companies stick to one or two-year terms with rolling renewal.
For non-executive directors, a letter of appointment is the standard document, covering tenure, fee, time commitment, conflicts protocol, and termination.
Companies House filing
Within 14 days of appointment, file Form AP01 with Companies House. The filing includes the director’s full name, date of birth, nationality, residential and service addresses, occupation, and country of residence.
ID verification under ECCT 2023 sits alongside the AP01 filing. The new director must complete verification either before or shortly after the filing, depending on the rollout phase at the time.
Onboarding a new director
Five steps to set the new director up properly:
- Director duties briefing pack. Provide a written summary of the seven statutory duties under CA 2006 ss.171 to 177, the fiduciary duties, and the company’s specific governance arrangements (board calendar, committees, reserved matters).
- D&O insurance. Ensure the new director is named on the company’s directors and officers liability policy. The premium impact is usually modest.
- Statutory book updates. Update the register of directors and the register of directors’ residential addresses.
- Bank and contract signatories. Update bank mandates and any contractual signatory lists where the new director will exercise authority.
- Induction. A first-day briefing on the company’s strategy, financials, key risks, and ongoing legal matters helps the new director hit the ground running and reduces personal liability exposure for early decisions.
Key takeaways
- Six types of director: executive, non-executive, shadow, de facto, alternate, nominee
- Appointment route depends on your articles — board resolution or shareholder vote
- Service contracts longer than two years require shareholder approval under s.188
- File Form AP01 with Companies House within 14 days of appointment
- ID verification under ECCT 2023 is compulsory during the 2026 rollout
- New directors take on statutory duties from day one — provide a duties briefing
Frequently asked questions
What is the difference between a non-executive and an executive director? An executive director is also an employee with day-to-day management responsibility, typically paid through PAYE under a service contract. A non-executive director provides independent oversight without operational responsibility, usually paid a fixed annual fee under a letter of appointment.
Does a board resolution alone appoint a director? It depends on your articles. Most modern model articles allow directors to be appointed by either a board decision or a shareholder ordinary resolution. Bespoke articles may require shareholder approval.
What is a shadow director? A person in accordance with whose directions or instructions the directors of a company are accustomed to act, even though not formally appointed. Shadow directors are subject to most of the same statutory duties as appointed directors.
Do I need a service contract for a non-executive director? Usually no. Non-executive directors typically have a letter of appointment that sets out term, fee, time commitment, and termination, rather than an employee-style service contract.
Does shareholder approval apply to all director service contracts? Only to contracts longer than two years (Companies Act 2006 section 188). Shorter contracts can be entered into by board resolution alone unless the articles require shareholder approval.
Useful resources
Companies Act 2006 https://www.legislation.gov.uk/ukpga/2006/46/contents
Companies House — Director duties https://www.gov.uk/running-a-limited-company/directors-responsibilities
Institute of Directors — Director resources https://www.iod.com/