147. Qualification of director

Question 1

147. Qualification of director

Answer 1

General overview
[147.01] Generally, a director’s office is dependent on his obtaining his qualification shares, and he has to vacate his office when he ceases to hold those shares. He has to obtain his qualification shares as directed by the constitution, within two months after his appointment or such shorter period as fixed by the constitution.

Question 2

Qualification of shares

Answer 2

[147.02] The court has jurisdiction under s 391 to relieve a director who has acted as a director without having obtained qualification shares within the prescribed period from the penalties imposed by s 147: Re Barry and Staines Linoleum Ltd [1934] 1 Ch 227, Ch D. A director who mortgaged his qualification shares was refused by the other directors to sit on the board of the company. Jessel MR held that the director still held the shares in his own right, notwithstanding having delivered to the mortgagee an unregistered transfer, and cannot be excluded from management. He had suffered an individual wrong for which he could sue for redress

Question 3

Contracts with “insiders”

Answer 3

[147.03] Two directors who did not take up the qualification shares, ceased to be directors according to the company’s articles, and were unable to bind the company to a contract entered into by them as de facto directors with one of themselves. The contract was a nullity, but the said director who had rendered services to the company, in his capacity as an estate agent, was able to claim on a quantum meruit