4. Director's Duties Flashcards
Example of notes required in annual accounts, w/ regard to D
Salary, bonus and compensation
When is there no approval needed for loans
If wholly-owned sub
What shareholder res must all companies get for loan/security/guarantee to Ds
OR
Provision - Ds owe duties to company
170(1)
How do Ms approve BoD in advance - provision
By OR or in AoA, 180(4)
What is a ‘minor transaction’ as exception to needing approval for loan to D/CP (LOAN/QUASI-LOAN)
Up to £10k
If authorising CoI, so no breach of 175, what does 175 state about Ds participation
Does not count for quorum or voting
When is a derivative claim likely
If only minority are in favour of bringing an action, as majority could remove Ds
1163
Defines NCA for 190
What happens if no approval from Ms obtained for LTSC
Provision void to extent of contravention, and C deemed to contain term entitling termination at any time w/ reasonable notice
275
Duty to keep reg of CS
When is approval not needed from Ms for LTSC or SPTs
Not needed from Ms of wholly owned sub, but is needed from Ms of HC
Which statutory duty is not enforceable as FD, limiting to damages
174
Tax implications for recipient of loan from close company
Only deemed to receive dividend equal to loan if loan written off
D w/ interest in 190 + voting at GM
D + CPs can vote, as MA 14 only applies to Ds
Where is NCA defined for 190
1163
Which statutory duty has a non-exhaustive list of factors to have regard to
Promote C success, 172
What can Ms not ratify
Anything illegal
What is the sanction for failing to get M approval for loan
Voidable (unless R impossible)
196
Affirming SPT by OR
What if approval of LTSC is by WR
Send copy of C to every M w/ WR
two-stage test for if approval needed under 188
C continues w/o company decision + C unable to terminate, or only in specific circumstances
What must transaction be if between £5k + £100k
Must be 10% of C’s NAV
When are there tax implications on loans by close company
If given to participator, and not in ordinary course of business nor less than £15k to full-time employee w/ no material interest
What is failure to declare under 182
Criminal offence, not just BoD
What kinds of companies need approval for loans to CPs/QL/CT
PrivC associated w/ plc, or plc
What is the general rule on company indemnifying Ds
Void
What does loan mnemonic stand for (CTAESD)
Company, transaction, approval, exceptions and sanction and director’s duties
What happens to liability for relevant parties if loan affirmed within reasonable period
Continues
What is D’s general authority under MA 3 subject to
MA 4 M reserve power
When is PrivC associated w/ pub
If pub is sub of Priv, or Priv is sub of plc
Why is there little use in short notice for approval of LTSC
Copy of C must be available for inspection 15 days prior to GM
What can Ms do if loan given w/o M approval
Affirm within reasonable period
If loan to D or CP of D, what is effect on BM
MA 14(1) - excluded from voting and quorum
162
Duty to keep reg of Ds
MA 52(2) is relevant to what
Prohibiting company from indemnifying Ds against liability to C.
Section on declaring interest in transaction
177
Part of CA on PrivC associated with pub if sub of plc
256(a)
What are the tax implications for the close company on loan to participator
Pay CT within 9 months + 1 day from end of period
1147
Deems delivery of notice 48 hours later
Procedure if LTSC proceeding to GM approval
C must be available for inspection 15 days prior to GM
When does MA 14(1) not exclude D w/ interest under 177 from participating in voting + quorum for BM
Tailord AoA, disapplied OR, replaced by SR, interest unlikely to give rise to CoI, or from permitted cause in MA 14(4)
D w/ interest in 190 + voting at BM
MA 14(1) applies, so D excluded from quorum + voting
When must D declare interest in existing transaction
Immediately
What can Ms do if Ds refuse to bring Ps for D’s BoD
Bring derivative claim
423
Copy of Annual Accounts to be sent to every M
When is CP not liable for gain/loss in unauthorised SPT
Unaware of contravention
What address must both D and CS file
Service
What is a credit transaction
Company provides goods/services w/ promise of future payment - no 3rd party
If D declares interest under 177, prior to BM, what happens at next BM
Deemed to form part of next BM
What could happen to D if duty breached
Terminate D’s position or disqualify D
What must D state when declaring interest under 177
Nature + extent of interest
Two BRs required whenever Board are approving contract
BR1 to approve form, and BR2 to authorise signatory
Provisions for statutory duties of Ds
170 - 177
When is a property transaction automatically substantial
Over £100k
Where is ‘connected person’ defined in CA for 239
252
Which duties should be considered when making decisions at BMs
ALL
What is the best practice for if D has interest in transaction
To declare
When will close company get a refund of CT paid on loan to participator
If waived/repaid
Provision requiring LTSC to be kept open for inspection once approved
228
What is the liability of relevant parties for failing to get M approval for loan
Account for gain + indemnify for loss
How do you work out C’s NAV for 190
Look at accounts or called up share capital
Model Article relevant on indemnifying Ds
52(2) prohibits indemnifying D against liability TO C
When is D not liable for gain and loss caused by unauthorised SPT
If took reasonable steps to ensure compliance, or unaware of contravention
D w/ interest under 177 + voting at GM
D can participate, as MA 14 only applies to Ds
What is a ‘minor transaction’ as exception to needing approval for loan to D/CP (CREDIT TRANSACTION)
Up to £15k or in ordinary course of business and normal terms
228
LTSC to be kept open for inspection once approved
413 requires what
Disclosure of credit advanced to Ds in accounts
mnemonic for loans to Ds
Can’t Take An Elephant Sky Diving
Two-stage test in reasonable skill duty (174)
Objective (reasonably expected of D) + subjective (skill D actually has)
1159 defines what
Wholly-owned sub
What is a quasi-loan
Company agrees to pay 3rd D/CP’s debt, and D/CP to reimburse
When does 175 not apply (other than transactions w/ C)
If unlikely to lead to CoI, or authorised
How long to notify CH of any changes to D + CS reg
14 days
If D/CP cannot vote in ratifying, what need they not be sent and in what case
If ratifying by WR, need not be sent WR
Two examples of ‘connected person’ under 252
Direct family + body corporate in which D + CPs own more than 20% share capital/voting rights
Part of CA on indemnifying Ds
232 - 240
239
Ms can ratify D’s BoD by OR
What is a close company
Company under control of 5 or less participators, or all participators are Ds
How are D duties relevant for loans to Ds/CPs
Consider 177 declaration + 172
What are PMMs when LTSC approved
Copies of C must be kept (228) open to inspection w/o charge for Ms
Why do statutory duties exist
To ensure M confidence and curtail wide power given under MA 3
MA provision on D’s general authority
MA 3
What must you have in mind if restructuring loan to avoid needing M approval
If still complying w/ D duties
How are statutory duties of Ds enforceable + provision
As FDs, 178
What happens if loan to D to defend Ps, and D unsuccessful
D must repay
What additional address must D file
Residential (kept private at CH)
When is approval required for D’s service conract
If C longer than 2 years, looking at aggregate period
How do you show duties considered when making decisions at BM
Note in Board Minutes
When does 177 not apply
D unaware, unlikely to give rise to CoI, other D reasonably aware, or concerns terms of D’s C
What info on Ds do CH require
Identity in reg of Ds, w/ service address, and various notes in annual accounts
Kind of res required for 190
OR
Section on LTSC
188
Provision for affirming SPT by OR
196
What if no approval given for SPT
Can affirm by OR within reasonable period, or transaction voidable
Where is CP defined for 190
252
How many statutory duties
7
Provision on interest in existing transaction
182
Where must QTPIP/QPSIP if given be disclosed
In D report + kept at reg office
When do additional restrictions apply for loan/security/guarantee?
If PubC/PrivC associated w/ pub
Duty to keep reg of CS provision
275
When are Ds liable for gain or loss caused by unauthorised SPT
Regardless of affirming
When is notice of interest under 177 deemed delivered + provision
48 hours later (1147)
When does 175 not appl
For transactions w/ C
Four normal remedies for breach of statutory duty
set aside, injunction, restore property and/or damages
Duty to keep reg of Ds provision
162
When is D/CP not liable for not getting M approval for loan
If D took reasonable steps, or D/CP unaware of contravention
Where is derivative claim in CA
260
Section on SPT
190
If D commits BoD, what can Ms do AFTER the fact + provision
Ratify by OR (239)
Who do Ds owe duties to
Company
What four options are open to Cs to indemnify Ds
Insurance, QTPIP, QPSIP, and funding Ds Ps
When must D declare interest under 177
Before transaction
180(4)
Ms can approve BoD in advance by OR/AoA
When is there no need to declare interest in transaction under 177
If D unaware, unlikely to lead to CoI, other Ds reasonably aware, or concerns service C
Why is bringing a derivative claim difficult
Need court permission
Where is substantial defined for 190
191
3-stage test for 190
CP, NCA and substantial
Inspection of D and CS reg for Ms is..
Free
When is property transaction NOT substantial
Below £5k
What may need to be disclosed in accounts after loan to D
The credit advanced
Provision requiring copy of Annual Accounts to be sent to every M
423
Where is wholly-owned sub defined in CA
1159
D w/ interest under 177 + voting at BM
MA 14(1) excludes D from voting + quorum
How can D give notice to other Ds of interest under 177
Written under 184, general, or at BM
Who cannot vote if ratifying under 239
Ds and any connected person
Examples of when no approval required for loans to D/CP
For D to defend Ps, or given by money-lending company on normal terms, or for minor transaction
When is 175 likely to be triggered
For when D ting for competitor
Can D vote/count for quorum if ratifying under 239?
No vote, but can count for quorum
