3. Directors Flashcards
Requirement for Director?
At least 1 natural person
16 or over
Mental capacity
4 types of Directors
Executive Director: Salary and employment contract with company
Non-executive Director: No contract/salary with company but paid to attend meeting
Shadow Director: Not officially director but influences company decisions
De facto Director: Act like a director but not appointed officially
Appoint a director?
1st Director –> IN01 Form + certification of incorporation
Any following directors –> Board Resolution (quick) or Ordinary Resolution
Notification requirement to appoint a director?
Notify Companies House within14 days of appointment + update Register of Directors
Actual Authority
Express: Director is given permission to enter into a contract
Implied: Director is not given explicit permission but has entered into similar transactions + hasn’t been stopped
Apparent Authority
No permission is given + representation made to a 3rd party + rely on that representation to enter into transaction
Approving long-term director’s service contract?
Garuanteed element of the service contract is more than 2 years - need Ordinary Resolution
Removal of Director?
- 28 days special notice to remove
- Inform director in question
- Call GM (14 days notice) + Director can defend
- Pass OR to remove director
- TM01 Form: update Register of Directors within1 4 days of termination
Bushell v Faith Clause?
Gives minority shareholders weighted voting rights = block resolutions
Director’s duties? (7)
- Avoid Conflict of interest
- Act in Good Faith, reasonable skill, care + due diligence
- Promote company success
- Independant judgement
- Not accept benefit from 3rd party
- Declare personal interest
- Act within powers
Remedies for director’s breach of duties?
- Void transaction
- Give company any profits
- Return property
- Injunction to prevent further breach
- Compensate company
“Ratify” director’s breach of duty?
Shareholders approve director’s actions - as if there was no breach
Process to ratify breach of duty?
Written Resolution or general meeting (OR)
Wrongful trading claim against director?
Director continues to trade when they knew/ought to known company had no reasonable prospect of avoiding insolvency
What resolution to approve SPT?
Ordinary Resolution
What is a person with significant control?
25% or more of company shares/voting rights OR
can remove majority of board of directors
What is a Substantial Property Transaction?
Director/connected to director (20% or more shares/voting rights)
buys from/sell to the company
a non-cash asset
of ‘substantial value’ (£5,000+ or 10% company value)
Fraudulent Trading claim grounds?
Company’s business is carried on with the intent to defraud creditors or for any fraudulent purpose
(high threshold)
Defence for Wrongful trading claim?
Director took every step to minimise company loss. e.g. legal advice, reduce company spending
What happens if OR is no passed to authorise director’s loan?
Void transaction + authoriser must account to company for loss (joint and severally liable)
When does a loan to director not need OR?
Company business
less than £10k transaction
