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Chief Executive Officer, Executive Director and Managing Director: Legally

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While it is common for the words chief executive officer, executive director and managing director to be used as synonyms, at law, they are completely different offices with different legal ramifications.

In this article, we set out to briefly discuss the positions and their ramifications according to the Companies Act, 2017.

At law, the business of a company shall be managed by or under the direction or supervision of a board of directors.

Two options are thus clear, the board of directors may decide to manage the business of the company on its own or entrust the management function to specialized staff. If the management function is so entrusted, the board of directors is obliged to provide direction and supervision to the specialized staff.

The word chief executive officer or CEO at law therefore means the person who is responsible, under the immediate authority of the board, for the day to day management of the affairs of the company. Strictly speaking, this person is not part of the board. A chief financial officer is another example of officers belonging to this management cadre. All persons holding management position are known as executive officers of the company.

Legally, the chief executive officer or other executive officers are not members of the board. They are answerable to the board. It is possible to appoint a CEO as part of the board, but in this case, the person occupies two independent positions with distinct, and sometimes conflicting obligations. A managing director or MD on the other hand, refers to an individual holding a board position, and not just a management position, who is entrusted with or heading the team of directors entrusted with the day to day management of a company. He is a director in charge of day to day management of the company.

Recall, we have said a board can decide to manage the company itself or entrust it to specialized staff and only provide oversight. Where the board decides to manage the company itself, it may appoint a number among them to be involved in the day-to-day management of a company. Any director so appointed is known as an executive director or ED. If there are a number of executive directors, the head of this team is the person properly described as managing director. An executive director is not subject to the retirement by rotation policy of directors. Unless specified otherwise in its articles, an executive director’s appointment terminates automatically if the executive director ceases for any reason to be a director. This means a person cannot occupy the position of executive director or managing director without first being appointed as a director of a company.

Those directors not involved in the day to day management of the company, but providing supervision and oversight in common with others are known as non-executive directors. The company secretary is ultimately responsible for providing guidance as to the duties, responsibilities and powers the distinct governance structures of management and board of directors in a company.

So next time you encounter the term chief executive officer,  executive director and managing director, or if these terms are used in your organization, it is important to ensure that their legal effect is appreciated and aligned with the provisions of the law, if that is not the case yet.

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Client Legal Alert – Equitas Legal Practitioners@2020

*This scholarly article is a general guide and does not contain definitive legal advice. Readers considering taking action on any of the issues discussed should speak to their legal advisors before taking any such action. Equitas disclaims any liability whatsoever arising from acting on this article. Action. Equitas disclaims any liability whatsoever arising from acting on this article.

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Professional Bio

Mr. Lungisani Zulu

partner

Mr. Lungisani Zulu (Partner – Banking, Tax and Finance) is a highly experienced legal practitioner with expertise in banking, financial services regulation, tax, and corporatebfinance. He holds a Master of Laws (LLM) in International Commercial Law from Cornell University School of Law, New York and a Bachelor of Laws (LLB) from the University of Zambia (UNZA)

He is an Advocate of the High Court of Judicature for Zambia with rights of audience before the Court of Appeal, Constitutional Court, and Supreme Court of Zambia, and is also a Commissioner for Oaths and Notary Public.

Mr. Zulu has over 15 years of standing on the Roll of Legal Practitioners in Zambia and possesses extensive experience in financial services regulation, legislative drafting, and corporate and commercial law. Having previously served as Associate for Tembo Ngulube and Associates and as Senior Counsel for the Bank of Zambia, his core competencies include banking and finance transactions, regulatory compliance, policy formulation, legal drafting, contract negotiation, and dispute resolution.

He has significant expertise in advising on financial laws, regulatory frameworks, and capital markets, as well as in providing legal support in litigation and arbitration matters. His practice also encompasses corporate governance, board advisory, and complex commercial transactions.

Mr. Zulu server as President of the Law Association of Zambia (LAZ) and also serves as President of savannah Law Network and a member of the Chartered Institute of Arbitrators (UK) and the Institute of Directors of Zambia and sits on the boards of both public and private companies.

Professional Bio

Ms. Chiluba Mumba

managing partner

The Firm’s Managing Partner, Ms. Chiluba Mumba, is a highly accomplished legal practitioner with primary expertise in Energy, Mining, Infrastructure, and Corporate Advisory. She holds a Master of Laws (LLM) in Corporate and Commercial Law from the University of London and a Bachelor of Laws (LLB) from the University of Zambia (UNZA). She is an Advocate of the High Court of Judicature for Zambia with rights of audience before all Superior Courts.

Ms. Mumba has over 15 years of standing on the Roll of Legal Practitioners in Zambia and has extensive experience in corporate and commercial law. Her core competencies include corporate advisory, regulatory compliance, project structuring, contract negotiation, and risk management, particularly within the energy, mining, and infrastructure sectors.

Previously she served as Associate for various firms and as Director Legal for the Energy Regulation Board. Her work experience spans across the energy sector in particular, electricity, petroleum, and renewable energy, with a strong focus on regulatory frameworks, licensing processes, project development, and investment structuring. She also has experience in commercial and civil dispute resolution, as well as governance and board advisory matters within highly regulated industries.

Ms. Mumba is equally a member of the Law Association of Zambia (LAZ) and the Institute of Directors of Zambia. She also serves as the Southern Africa Regional Coordinator for the Africa Minigrid Developers Association (AMDA) and is an Associate Member of the Chartered Institute of Arbitrators.