7d Members

Question 1

What are the two main documents regulating the relationship between the company and its memebers?

Answer 1

• Articles of association
• Shareholders agreement

Question 2

Does a company need to use a shareholders agreement? Can they?

Answer 2

No, but if there are confidential matters the members wish to have confirmed then they can have one and not have to file at CoHo.

Question 3

What are the members rights under CA06?

Answer 3

• Be sent a copy of the annual accounts.
• To vote at a meeting of the members.
• To appoint a proxy to attend a meeting on their behalf.

Members can choose to take legal action should a company refuse to respect these rights.

Question 4

What decisions require shareholder approval to be valid?

Answer 4

• Service contracts
• Substantial property transactions
• Loans to directors
• Loans to directors- exceptions
• Payments for loss of office

Question 5

Re service contracts, when would a decision need member approval?

Answer 5

If the company wishes to appoint a director for 2 or more years. If not the contract is deemed to include a term allowing the company to terminate it by reasonable notice at any time.

Question 6

Re substantial property transactions, when would a decision need member approval?

Answer 6

Any asset sold or purchased of substantial value - either more than £100,000 or more than £5,000 and more than 10% of the company’s assets.

Question 7

Re loans to directors, when would a decision need member approval?

Answer 7

If the company plans to make a loan to a director or give guarentee for a loan to a third party on behalf of the director.
Failure to do so makes the loan voidable and Director must pay any gain or repay any loss back to the company.

Question 8

What are the exceptions to needing member approval with regards to loans to directors?

Answer 8

• the loan is used to meet business expenses or defending company in legal/regulatory actions.
• minor amount.
• loan is between group companies.
• company’s usual business is lending money and terms are the same as lending tk the public.

Question 9

Re payments for loss of office, when would a decision need member approval?

Answer 9

Any ex-gratia payments (payments not part of company’s contract) re loss of office or retirement need to be provide members with a memorandum setting out the details for approval.
If not the company can claim it back along with any gains or losses.