5. Company Management

Question 1

What does the director do?

Answer 1

Conducts the company’s affairs

Question 2

What is the minimum age a director can be?

Answer 2

16

Question 3

In what three ways can a director be appointed?

Answer 3

1. Signing section 9 documents upon registration of a new company
2. Appointed by ordinary resolution at an annual general meeting
3. Casual vacancy appointed by the board

Question 4

Name six different types of director

Answer 4

1. Executive director
2. Non-executive director (just attends board meetings)
3. Managing director (carries out day to day management)
4. Alternate director (acting in place of another director)
5. Shadow director (a person whose instructions the board are accustomed to follow)
6. De facto director (director by virtue of conduct)

Question 5

Name five ways a director can be removed

Answer 5

1. Removal
2. Resignation
3. Retirement
4. Termination per the articles (failing to comply with the company’s articles)
5. Disqualification (per the Company’s Directors Disqualification Act 1986)

Question 6

When does the Company Directors Disqualification Act 1986 state a disqualification order occurs? (Six instances)

Answer 6

1. The director has been in persistent default of the CA 2006
2. The director has committed a serious offence
3. The director has been found guilty of fraudulent trading
4. The director has been found liable for wrongful trading
5. The Secretary of State considers it to be in the public interest
6. Breaches of competition law have occurred

Question 7

In what two circumstances must a disqualification of directors be made?

Answer 7

1. A person has been a director of a company which has at any time become insolvent, and
2. Their conduct as director of that company makes them unfit to be concerned in the management of a company

Question 8

What six factors may result in a court reducing the disqualification period of disqualified directors?

Answer 8

1. Lack of dishonesty
2. Loss of directors own money
3. Absence of personal gain
4. Efforts to mitigate
5. Low likelihood of reoffending
6. The director has offered material assistance and cooperation

Question 9

Define wrongful trading

Answer 9

Where a company is wound up and the director knew/should have known that there was no reasonable prospect of the company going into insolvent liquidation and they did not take sufficient steps to minimise the potential loss to creditors

Question 10

Define fraudulent trading

Answer 10

Where business of a company is carried on with the intent to defraud creditors of the company or for any fraudulent purpose

Question 11

Directors’ powers are derived from the ______ of ______ of the company

Answer 11

Articles of association

Question 12

Are directors agents of members, and so subject to their instructions?

Answer 12

No

Question 13

Per CA 2006, the power of directors in a to be free of any ______ under the company’s constitution

Answer 13

Limitation

Question 14

What four restrictions are the powers of directors as a collective body subject to?

Answer 14

1. Matters requiring special resolutions
2. Articles setting out limits
3. Special resolutions to alter articles by members
4. Power can only be for the purpose which they were granted

Question 15

What type of authority do individuals require to be directors? (3)

Answer 15

1. Express actual authority
2. Implied actual authority
3. Ostensible/apparent authority

Question 16

What are the seven general duties of the directors per CA 2006?

Answer 16

1. Act within powers
2. Promote the success of the company
3. Independently judge
4. Reasonable skill, care and diligence
5. Avoid conflicts of interest
6. Benefits from third parties are forbidden
7. Interest in a transaction to be disclosed to the full board at the next board meeting

Question 17

A director may be required to do what if found to be in breach of any of their duties?

Answer 17

To make good of any loss suffered by the company

Question 18

What happens to a directors contract if they are found to be in breach of their duties?

Answer 18

It may be rendered voidable

Question 19

If a director breaches their contract, what happens to property given to them by the company?

Answer 19

It may be recovered

Question 20

Any provision to exempt a director from or indemnify them against liability for breach of duty is _____

Answer 20

Void

Question 21

What must a single member limited company include on its register?

Answer 21

That there is only one member

Question 22

Give three rights that members have

Answer 22

1. Right to be a sent a copy of annual accounts and reports
2. Right to require directors to call a general meeting
3. Right to appoint a proxy

Question 23

What four matters require approval of members in a general meeting per CA 2006?

Answer 23

1. Service contracts
2. Substantial property transaction (lower of assets exceeding £100,000 or 10% net assets or de minimis of £5,000)
3. Loans and quasi-loans to directors
4. Payments for loss of office

Question 24

What five statutory rights do minority shareholders have?

Answer 24

1. Variation of class rights (holders of at least 15% of the class of shares)
2. Calling meetings (can be requisitioned by those holding at least 5% of the company’s paid up capital)
3. Notice of members’ resolutions must be given by the company and requested by members holding at least 5% of voting rights
4. Share buyback from out of capital- any member can apply to court to prohibit the transaction
5. Registration of limited company as unlimited- can be prevented by individual members

Question 25

When may a member bring a derivative claim on behalf of the company?

Answer 25

When an actual or proposed act or omission by a director involves negligence or breach of duty

Question 26

In what two circumstances will a derivative claim be refused by court?

Answer 26

1. If a hypothetical director acting to promote the success of the company would not continue with the claim
2. If the act/omission has been approved of by the shareholders

Question 27

A member may petition the court for a winding up on the grounds that it is ____ and _______ to do so

Answer 27

Just, equitable

Question 28

In what three circumstances have orders for winding up been made?

Answer 28

1. Where the company was formed for an illegal or fraudulent purpose
2. Where there is a complete deadlock in the management of its affairs
3. Where the directors deliberately withheld information so that the shareholders had no confidence in the company’s management

Question 29

Which four actors can call a general meeting of a company?

Answer 29

1. The directors
2. 5% of the members
3. The court
4. An auditor who gives notice of their resignation

Question 30

A general meeting of a plc must be called where net assets fall to _____ or less of its called up share capital

Answer 30

Half

Question 31

In order to remove a director or auditor, shareholders must give ______ days notice to the company

Answer 31

28

Question 32

An ordinary resolution must give notice of ____ days, with at least _____% of votes cast at the meeting. It only requires filing with the registrar for changes to ____ and ____

Answer 32

An ordinary resolution must give notice of 14 days, with at least 50% of votes cast at the meeting. It only requires filing with the registrar for changes to directors and auditors

Question 33

A special resolution must give notice per ____ ____, with at least _____% of votes cast at the meeting. It _____ requires filing with the registrar

Answer 33

A special resolution must give notice per meeting notice with at least 75% of votes cast at the meeting. It always requires filing with the registrar

Question 34

An ordinary written resolution requires more than ____% of members consent for a ltd company

A special written resolution requires ____% of members consent for a ltd company

Answer 34

50%

75%