What’s the difference between being an advisor and being a director?

Being a director

The Companies Act of 2008 requires every company to have at least one director. The director(s) have their responsibilities set out in that Act, and they are required to act with due care and skill in a fiduciary capacity for the company.

A person can be either an executive director (someone involved in the day-to-day operations and decisions of the company), a non-executive director (someone sitting on the board who has no operational involvement but has some interest in the business, usually financial), or an independent non-executive director (someone with no relationship to or financial interest in the company and who can be seen to be acting completely independently).

By being part of a company’s board of directors, every director has an official capacity and an official responsibility that is legally enforceable. This is not necessarily a bad thing, but with the increased spotlight placed on directors by the new Companies Act, it has become a lot more important for directors to make sure they comply with all the responsibilities that they have to adhere to.

Being an advisor

Since an advisory board is not a requirement but rather a choice, it offers a lot of flexibility. An advisory board can be very informal, such as a business owner bringing together a group of close friends on a regular basis, where the advisory board acts as a sounding board for the owner who then takes the input into account when making their own decisions. It can also be formalised into a more formal advisory board for a company, with its own set of guidelines, rules and responsibilities.

Either way, the advisory board offers a flexible and useful tool for young businesses to involve exceptional people in their growth strategies without imposing too many formal requirements on them, thereby making it more attractive to the individuals as well.