5. Management 1 Flashcards
Is a co sec required
Not compulsory (s270(1))
Role of co secretary
Deals with legal admin requirements
Is an officer (s1121)
Common duties of co secretary
Write up BM/GM meeting minutes
Update internal registers
Send necessary returns to Registrar of Companies
Co secretary restrictions
No authority to enter into trading contracts of the co’s behalf (e.g to borrow money)
Removal of co secreatary
Directors have the power to remove secretary at any time
Dependent on contract terms
May include compensation for breach of contract/give rise to statutory employment law claims
Form to file upon resignation of co secreatary
TM02 s276(1)
How many directors must a co have s154
Every private co to have at least one (s154(1)
Public co’s must have 2 directors (s154(2))
Executive
An employee of the co
Has a service contract with it (written/verbal)
Chief executive
Board of directors can delegate individuals to run the co
Board fixes service contract including remuneration
NEDS
Does not participate in day-day business
Attend and votes at board meetings
liability of NEDS
Relevant to public cos to act as judges and help prevent poor decision making
Provisions of CA 2006 relating to directors apply to executives and NEDS
Can still be liable to co (Equitable life v Bowley)
How are chairs appointment
Directors have powers in the articles to appoint themselves as chair (art 12 MA)
Chair role
Leads director’s board meetings & shareholder’s GM
Appointed by passing BR
May be removed from the board at any time
What is a shadow director
Gives directions/instructions to directors and those directors act in accordance with them (s251(1))
Not formally appointed as director but influences their decision
May be used to obviate onerous duties imposed on directors
Ultraframe v Fielding
Shadow director only when directors act on instructions given
Person advising in a professional capacity does not become liable as shadow director (s251(2)
Defacto director
Person never appointed but performs the functions of a director
Person appointed under defect stays on after expiry of term
Falls within definition of director under s250(1) CA 2006
What is an alternate director
One attending board meeting in place of a director (stand-in)
Governed by articles of the co
MA do not provide for appointment of alternate directors (special article to be added)
how old must directors be s157
16
restriction on someone being a director
Undischarged bankrupt cannot act as director
How can directors be removed
Special notice of the resolution must be given by proposing shareholder (s168(2))
form for becoming director post incorporation
After incorporation AP01 (individual) AP02 (corporate)
MA 3
Directors are responsible for managing the co and can exercise all the co’s powers
MA 5
Allows directors to delegate
To such person/committee
By such means
To such an extent
In relation to such matters
On such terms
Which 2 types of authority can directors exercise
Actual and apparent authority
What happens if director exceeds authority
Personally liable for breach of warranty of authority to 3rd party with whom they are dealing
Actual authority
principal gives agent specific consent to agent’s actions
Can be express/implied
Apparent authority
agent acts without principals consent but still binds the principal in the contract with the third party
What is a directors employment contract called
Service contract
What if there are only 2 directors & one of them is to be granted the sc
Change articles via SR at GM allowing directors to vote
Guaranteed term
Director contractually guaranteed to be employed for specified period of time
What is required for guaranteed SC of longer than 2 years
it must obtain prior consent of shareholders by OR at GM (s188)
If shareholder approval is not obtained for a SC
SC still effective, save guaranteed term clause
Contract terminable on reasonable notice
Definition of service contract s227(1)
A contact under which the director undertakes to perform services personally for the co. s227(2) this may be within/outside the scope of the ordinary duties of a director
Where must a SC be kept
All SC must be kept at registered office or single alternative inspection location s228
Must be kept for inspection for one year after contract expiry (s229(2))
If directors are uncooperative with s168 notice
Shareholder can force directors to call GM and consider the resolution s303, so long as they have 5% of shares and serve the notice via prescribed form
s304(1)(a) directors have 21 days from receipt of this notice to call GM (must not be held more than 28 days after date on which meeting was called)
SH can call meeting themselves (not more than 3 months after date on which directors became required to call the meeting)
What is to be sent to director
Notice to director must be send immediately (s169(1))
bushell v faith clause
Special article giving director-shareholders weighted voting rights on a resolution for their removal
Check whether it is possible to remove the clause at GM
Check compensation amount for breach of contract (may be expensive)
methods of a director from dismissal
Bushell v Faith clause
Give directors weighted voting rights
Fixed term service contract of long duration without break clause
Paying significant compensation may deter dismissal
Shareholder
agreement
Under which the parties could agree not to vote against specified directors
Director loan
Outstanding loan, repayable if director loses their position
Grounds for disqualification of a director by court
Conviction of indictable offence
Persistent breaches of co legislation
Fraud in winding up
On summary conviction for filing or notice default
Being an unfit director of insolvent cos
Disqualification after investigation
Fraudulent or wrongful trading
Breach of competition law
Effect of disqualification
Director may not
Be a director
Be concerned in any way in the promotion, formation or management of a co
Contravention of director disqualification
Contravention is a criminal offence and punishable by up to 2 years imprisonment (s13 CDDA)
Disqualification under the articles
MA 18
Bankrupt
Mentally ill
Doctors written opinion is given that they are physically/mentally incapable of acting as a director
Auditors
Are officers of co (s487(1))
Role is limited to co finances
Auditor reviews co accounts independently yearly (s485)
auditors duty in relation to accounts
Must state whether accounts have been prepared properly and give true and fair view of co (s495(3))
if auditors fail to spot fraud against co
Can be sued if they fail to spot fraud against co
Moore Stephens v Rolls
Co itself had been used to defraud several banks
auditor Removal from office and resignation
Auditor may be removed at any time by SH s510
OR is required, of which special notice given by proposing shareholder to Co
WR cannot be used
Auditor can resign by notice in writing sent to reg office s516
Auditor ceasing to hold office must deliver statement to co of the circumstances in connection with the cessation
Statement must be filed with Reigstrar ++
