9: A Company's Officers Flashcards
What are a company’s principal officers?
A company’s principal officers are its directors and its secretary, if there is one.
When are a company’s first officers appointed?
A company’s first officers are appointed in Form IN01 when the company is incorporated.
Are a company’s officers also employees?
Yes, a company’s officers are also employees.
What are a company’s directors considered as?
A company’s directors are fiduciaries.
What laws govern the duties of company directors?
The duties of company directors are codified in the Companies Act 2006 (CA 2006).
What disqualifications can directors face under CA 2006?
Directors who do not meet the required standard may face disqualification under the Company Directors Disqualification Act 1986 (CDDA 1986).
How many officers must a private company have?
A private company must have at least one director, and it need not have a company secretary.
How many officers must a PLC have?
A PLC must have at least two directors and must have a company secretary.
What are the age requirements for directors?
Directors must be at least 16 years old when they take office (s157).
What does s156A require regarding company directors?
s156A will require that all a company’s directors must be natural persons.
Can a disqualified person under CDDA 1986 be a director?
No, a person disqualified under CDDA 1986 cannot be a director.
Can an undischarged bankrupt be a director?
No, an undischarged bankrupt cannot be a director.
Does CA 2006 restrict who can be a company secretary?
No, CA 2006 does not restrict who can be a company secretary in a private company.
Does a PLC company secretary need qualifications?
A PLC company secretary must hold one of several specified qualifications.
How are directors appointed according to MA17?
Directors can be appointed by an ordinary resolution of the shareholders or by a board resolution.
What form is used to notify the appointment of a director?
Form AP01 is used to notify the appointment of a director within 14 days.
What form is used to notify the appointment of a corporate director?
Form AP02 is used to notify the appointment of a director which is a company.
What must a director do before acting legally?
The director must consent to act.
What must the company maintain regarding directors?
The company must keep its own registers of its directors.
What forms are used for notifying the appointment of a company secretary?
Form AP03 is used for the appointment of a company secretary within 14 days.
What must be included in directors’ service contracts?
Directors’ service contracts must include matters like remuneration and authority to enter transactions on behalf of the company.
What procedural requirement exists for directors’ service contracts for over two years?
The guaranteed duration (over 2 years) will be binding only if first approved by an ordinary resolution of the shareholders.
How long must a summary of the directors’ service contract be available for inspection at the registered office before the GM?
For 15 days before and then at the GM itself, to prevent the company from calling the GM on short notice.
What is required for shareholders to be able to inspect directors’ service contracts?
Companies must keep copies of all directors’ service contracts available for inspection at the registered office until one year after the contract expires.
Under what conditions can a director’s appointment be terminated?
If they
- are prohibited under CA 2006 or CDDA 1986,
- become bankrupt,
- are incapacitated for more than three months, or
- resign.
How can shareholders remove a director?
Shareholders can remove a director by passing an ordinary resolution at a general meeting.
What notice is required for removing a director?
Special notice of the intention to remove a director must be given to the company no later than 28 days before the general meeting.
What must be filed when a director’s appointment is terminated?
Form TM01 must be filed at Companies House within 14 days.
What must a company do after terminating a director’s appointment and sending the TM01 form?
The company must update its own registers.
How can a company secretary be removed?
A company secretary can be removed under the directors’ general power of management (MA3).
What form is used for the termination of a company secretary’s appointment?
Form TM02 must be filed at Companies House within 14 days following termination.
What does s217 require if a company wishes to make a payment to a director for removal?
s217 requires shareholder approval by an ordinary resolution.
When is no approval required in order to pay a removed director under s220?
If the payment is made pursuant to a legal obligation, such as damages for breach of the director’s employment rights.
What are the two situations where a person will be subject to obligations as a director even if not appointed as one?
They are de facto directors and shadow directors.
How does s250 define a director?
Someone acting as a director will be treated as a director even if they have not been formally appointed - so they’ll be subject to obligations.
What is a de facto director?
A de facto director is someone acting as a director and will be treated as a director for the purposes of CA 2006 even if not formally appointed.
What is a shadow director?
A shadow director is a person who is not formally appointed as a director and is not acting as a director by going to board meetings, but whose instructions or directions the directors are accustomed to act upon.
Are you a shadow director if you are advising directors in a professional capacity?
s251(2) specifies that a person is not a shadow director just because they advise in a professional capacity.
What is an executive director?
An executive director has a defined role in the management of the company and is almost always employed under a service contract. (E.g. Tim Davie, Director General)
What is a non-executive director?
A non-executive director acts as an outside consultant, contributes an objective viewpoint, and is not an employee. (e.g. Chair of the Board at BBC)
What is the nature of directors’ duties?
Directors control the business and assets of the company and have fiduciary duties codified in CA 2006 (ss170-177).
What are the duties owed by directors under s171-177
s171: act within powers
s172: promote the success of the company
s173: exercise independent judgement
s174: exercise reasonable care, skill and diligence
s175: avoid conflicts of interest
s176: not to accept benefits from third parties
s177: declare interests
What is the mixed objective/subjective test in s174 (exercise reasonable care/skill/diligence)?
The mixed objective/subjective test means a director must meet the standard that would be reasonably expected of someone in their position (objective) and also consider the director’s own knowledge, skill, and experience (subjective).
What are the two main situations s175 (conflicts) aims to prevent?
(1) A director learning of an opportunity that could benefit the company but exploiting it themselves, and
(2) A director placing themselves in a situation where their interests conflict with those of the company.
What is a direct or indirect director’s interest?
Direct: They have a shareholding in a company
Indirect: Their husband or wife has an interest in a transaction.
How must a director declare their interest under s177?
A director must declare their interest at a board meeting or in writing, and it should be recorded in the minutes.
When must a director declare their interest under s177?
A director must declare their interest at the earliest opportunity.
What happens if a director doesn’t make a declaration?
It will be a criminal offence.
What are the exceptions to the requirement in s177 of when a director has to declare an interest?
(1) The director’s interest cannot reasonably be regarded as likely to give rise to a conflict of interests.
(2) The other directors are already aware of the director’s interest.
(3) The director’s interest concerns the terms of their service contract.
What is the relationship between s177 (declaring interests) and MA14?
s177 CA 2006 applies in every case unless an exception is relevant, so they must declare an interest.
Only if there are Model Articles: MA14 prevents a director from voting if they have an interest in the proposed transaction and therefore wouldn’t need to declare an interest.
What 4 things can a company not do regarding directors without prior approval by OR?
CA 2006, without an approval by OR, the company cannot:
- enter into substantial property transaction with director/connected person
- make loan to director
- guarantee director service contract for over 2 years
- make a gratuitous payment for the loss of the director’s office
What two things are limited around directors that don’t involve an OR?
- Directors may need shareholders’ authority to issue new shares
- Director doesn’t count in quorum or vote in an interested vote (MA14)
What power does CDDA 1986 give to courts regarding disqualification?
CDDA 1986 gives courts the power to disqualify individuals from acting as a director or being involved in the management of a company for up to 15 years.
What is the maximum period of disqualification under s2 of CDDA 1986 (conviction for an indictable offence)?
15 years.
What is the maximum period of disqualification under s3 (persistent breaches of companies legislation) of CDDA 1986?
5 years.
What is the maximum period of disqualification under s4 of CDDA 1986 (fraudulent trading or general fraud)?
15 years.
What is the maximum period of disqualification under s5 of CDDA 1986 (failure to comply with filing requirements 3x in the last 5 years)?
5 years.
What is the directors and shadow directors disqualification period under s6 of CDDA 1986 for unfit conduct (conduct making a person unfit to be involved in management and it being insolvent)?
2 to 15 years.
What is the maximum period of directors and shadow directors disqualification under s8 of CDDA 1986 (disqualification in the public interest)?
15 years.
What is the maximum period of directors and shadow directors disqualification under s9A of CDDA 1986 (breach of competition legislation)?
15 years.
What is the maximum period of disqualification under s10 of CDDA 1986 (participation in wrongful or fraudulent trading)?
15 years.
Does CDDA 1986 apply to de facto directors too?
Yes, it does.
