7b Powers

Question 1

What is the division of power in a company?

Answer 1

Members give the powers to the directors to run the company how they see fit and should not interfere.

Question 2

What control do members keep over the directors?

Answer 2

• Vote to remove them
• Change articles (directors must use their power inline with internal constitution)

Question 3

What control over the directors powers is held in legislation?

Answer 3

• Statutory duties - use their powers for the purpose given
• Certain decisions require member approval (such as changing company name, shares etc)

Question 4

What are the restrictions on the director’s powers?

Answer 4

• General statutory (Using power for the purpose given)
• Specific statutory (Certain decisions must have member approval - appointment/ removal of director and change in articles.
• Articles - can be a provision to restrict directors powers.
• Powers of members - directors can be removed.

Question 5

Name the 3 ways in which a director can have authority.

Answer 5

• Actual/Express
• Implied
• Ostensible/apparent

Question 6

What is ostensible/apparent authority of a director?

Answer 6

If the board act as if a director has the authority to enter a contract, this is binding.

Question 7

If a company enters into a contract with another, knowing the other party does not have actual authority to do so, is this binding?

Answer 7

If the company knows they have no actual or implied authority then this contract is voidable and damages can be claimed. However if the company thinks they may have implied authority then this is not bad faith and is binding.