6 - The Role Of The Board Flashcards
In whom is managerial power vested?
The power to manage the company is initially vested in the members but, in all but the smallest companies, it is impractical for the members to manage the company. It is common for the members to delegate managerial power to the directors.
What does article 3 of the model articles state?
Article 3 of the model articles states that ‘subject to the articles, the directors are responsible for the management of the company’s business, for which purpose they may exercise all the powers of the company’.
To what extent can the members interfere in management?
If the articles contain a provision vesting general managerial power in the directors (which is usually the case), then the members cannot interfere in the management, unless the articles so provide. For example, article 4(1) of the model articles provides that the members may ‘by special resolution, direct the directors to take, or refrain from taking, specified action’.
Can the directors delegate their managerial powers to others?
By default, the directors do not have the power to delegate its managerial powers to others - such delegation is only permissible if the articles allow for it (which they usually do). For example, article 5(1) of the model articles provides the directors with wide powers of delegation, stating that ‘subject to the articles, the directors may delegate any of the powers which are conferred on them under the articles:
- to such person or committee;
- by such means (including by POA);
- to such an extent;
- in relation to such matters or territories; and
- on such terms and conditions; as they think fit’.
Who has the power to call a board meeting?
The power to call a board meeting is a matter for the company’s articles, with the model articles providing that any director may call a board meeting. Such a meeting is called by providing notice of it to the other directors (model articles for private companies, article 9(1); model articles for public companies, article 8(1)-(3)).
In relation to board meetings, what constitutes a quorum?
What constitutes a quorum is a matter for the company’s articles. If the articles are silent, a majority of directors will be required to attend (YORK TRAMWAYS CO LTD v WILLOW (1882). The model articles provide that the quorum for a board meeting can be determined by a decision of the directors but it must not be less than two. If the directors have not decided what constitutes a quorum, it will be two (model articles for private companies, article 11(2); model articles for public companies, article 10(2)).
How are board decisions taken in private companies and public companies?
How the board makes decisions at a meeting is a matter for the company’s articles, with the model articles specifying different rules for private and public companies.
Article 7(1) of the model articles for private companies provides that any decision of the directors must be either (i) a majority decision at a meeting; or (ii) a decision taken in accordance with article 8. Article 8(1) and (3) provides that a decision of the directors can be taken without a board meeting if all the directors eligible to vote on the matter indicate to each other by any means that they share a common view on the matter.
Article 13 of the model articles for public companies provides that, subject to the articles a decision is taken at a board meeting by a majority of the votes of participating directors, and each director participating in a board meeting has one vote. Decisions may also be taken without a meeting via a directors’ written resolution.
For how long must a company keep minutes of its board meetings?
CA2006 provides that every company must record all minutes of proceedings at directors’ meetings (s. 248(1)) and must keep these records for at least 10 years from the date of the meeting (s. 248(2)).
Is a company required to appoint a company secretary?
A public company must appoint a company secretary (CA2006, s. 271), and may have more than one secretary (who will be known as ‘joint secretaries’). A private company is not required to appoint a company secretary (CA2006, s.270(1)) (unless its articles state otherwise) but it may do so if it wishes.
What is the role of a company secretary?
The role of the secretary is not set out in the law, nor are there any activities that the secretary must carry out under CA2006. The precise role of the secretary will vary from company to company but, in many companies, the secretary will be ‘the chief administrative officer of the company’ (PANORAMA DEVELOPMENTS (GUILDFORD) LTD v FIDELIS FURNISHING FABRICS LTD (1971)). They will engage in such tasks as:
- ensuring that the company’s filing and disclosure requirements are complied with;
- preparing the agenda and minutes of board meetings and general meetings;
- ensuring that board meetings and general meetings are conducted in accordance with the law and the company’s articles;
- maintaining the company’s books and statutory registers;
- advising on the preparation and publication of annual reports and accounts, and other financial disclosures; and
- advising on compliance with legal requirements and best practice recommendations.
What authority does a company secretary have as an agent?
An agent may be given express authority to engage in certain acts and a secretary also has apparent authority to bind the company in relation to administrative matters (PANORAMA DEVELOPMENTS (GUILDFORD) LTD v FIDELIS FURNISHINGS FABRICS LTD (1971)).
