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Business and Employment Law > 9: A Company's Officers > Flashcards

9: A Company's Officers Flashcards

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1
Q

What are a company’s principal officers?

A

A company’s principal officers are its directors and its secretary, if there is one.

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2
Q

When are a company’s first officers appointed?

A

A company’s first officers are appointed in Form IN01 when the company is incorporated.

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3
Q

Are a company’s officers also employees?

A

Yes, a company’s officers are also employees.

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4
Q

What are a company’s directors considered as?

A

A company’s directors are fiduciaries.

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5
Q

What laws govern the duties of company directors?

A

The duties of company directors are codified in the Companies Act 2006 (CA 2006).

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6
Q

What disqualifications can directors face under CA 2006?

A

Directors who do not meet the required standard may face disqualification under the Company Directors Disqualification Act 1986 (CDDA 1986).

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7
Q

How many officers must a private company have?

A

A private company must have at least one director, and it need not have a company secretary.

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8
Q

How many officers must a PLC have?

A

A PLC must have at least two directors and must have a company secretary.

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9
Q

What are the age requirements for directors?

A

Directors must be at least 16 years old when they take office (s157).

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10
Q

What does s156A require regarding company directors?

A

s156A will require that all a company’s directors must be natural persons.

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11
Q

Can a disqualified person under CDDA 1986 be a director?

A

No, a person disqualified under CDDA 1986 cannot be a director.

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12
Q

Can an undischarged bankrupt be a director?

A

No, an undischarged bankrupt cannot be a director.

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13
Q

Does CA 2006 restrict who can be a company secretary?

A

No, CA 2006 does not restrict who can be a company secretary in a private company.

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14
Q

Does a PLC company secretary need qualifications?

A

A PLC company secretary must hold one of several specified qualifications.

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15
Q

How are directors appointed according to MA17?

A

Directors can be appointed by an ordinary resolution of the shareholders or by a board resolution.

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16
Q

What form is used to notify the appointment of a director?

A

Form AP01 is used to notify the appointment of a director within 14 days.

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17
Q

What form is used to notify the appointment of a corporate director?

A

Form AP02 is used to notify the appointment of a director which is a company.

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18
Q

What must a director do before acting legally?

A

The director must consent to act.

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19
Q

What must the company maintain regarding directors?

A

The company must keep its own registers of its directors.

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20
Q

What forms are used for notifying the appointment of a company secretary?

A

Form AP03 is used for the appointment of a company secretary within 14 days.

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21
Q

What must be included in directors’ service contracts?

A

Directors’ service contracts must include matters like remuneration and authority to enter transactions on behalf of the company.

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22
Q

What procedural requirement exists for directors’ service contracts for over two years?

A

The guaranteed duration (over 2 years) will be binding only if first approved by an ordinary resolution of the shareholders.

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23
Q

How long must a summary of the directors’ service contract be available for inspection at the registered office before the GM?

A

For 15 days before and then at the GM itself, to prevent the company from calling the GM on short notice.

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24
Q

What is required for shareholders to be able to inspect directors’ service contracts?

A

Companies must keep copies of all directors’ service contracts available for inspection at the registered office until one year after the contract expires.

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25
Q

Under what conditions can a director’s appointment be terminated?

A

If they
- are prohibited under CA 2006 or CDDA 1986,
- become bankrupt,
- are incapacitated for more than three months, or
- resign.

26
Q

How can shareholders remove a director?

A

Shareholders can remove a director by passing an ordinary resolution at a general meeting.

27
Q

What notice is required for removing a director?

A

Special notice of the intention to remove a director must be given to the company no later than 28 days before the general meeting.

28
Q

What must be filed when a director’s appointment is terminated?

A

Form TM01 must be filed at Companies House within 14 days.

29
Q

What must a company do after terminating a director’s appointment and sending the TM01 form?

A

The company must update its own registers.

30
Q

How can a company secretary be removed?

A

A company secretary can be removed under the directors’ general power of management (MA3).

31
Q

What form is used for the termination of a company secretary’s appointment?

A

Form TM02 must be filed at Companies House within 14 days following termination.

32
Q

What does s217 require if a company wishes to make a payment to a director for removal?

A

s217 requires shareholder approval by an ordinary resolution.

33
Q

When is no approval required in order to pay a removed director under s220?

A

If the payment is made pursuant to a legal obligation, such as damages for breach of the director’s employment rights.

34
Q

What are the two situations where a person will be subject to obligations as a director even if not appointed as one?

A

They are de facto directors and shadow directors.

35
Q

How does s250 define a director?

A

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.

36
Q

What is a de facto director?

A

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.

37
Q

What is a shadow director?

A

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.

38
Q

Are you a shadow director if you are advising directors in a professional capacity?

A

s251(2) specifies that a person is not a shadow director just because they advise in a professional capacity.

39
Q

What is an executive director?

A

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)

40
Q

What is a non-executive director?

A

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)

41
Q

What is the nature of directors’ duties?

A

Directors control the business and assets of the company and have fiduciary duties codified in CA 2006 (ss170-177).

42
Q

What are the duties owed by directors under s171-177

A

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

43
Q

What is the mixed objective/subjective test in s174 (exercise reasonable care/skill/diligence)?

A

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).

44
Q

What are the two main situations s175 (conflicts) aims to prevent?

A

(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.

45
Q

What is a direct or indirect director’s interest?

A

Direct: They have a shareholding in a company
Indirect: Their husband or wife has an interest in a transaction.

46
Q

How must a director declare their interest under s177?

A

A director must declare their interest at a board meeting or in writing, and it should be recorded in the minutes.

47
Q

When must a director declare their interest under s177?

A

A director must declare their interest at the earliest opportunity.

48
Q

What happens if a director doesn’t make a declaration?

A

It will be a criminal offence.

49
Q

What are the exceptions to the requirement in s177 of when a director has to declare an interest?

A

(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.

50
Q

What is the relationship between s177 (declaring interests) and MA14?

A

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.

51
Q

What 4 things can a company not do regarding directors without prior approval by OR?

A

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

52
Q

What two things are limited around directors that don’t involve an OR?

A
  • Directors may need shareholders’ authority to issue new shares
  • Director doesn’t count in quorum or vote in an interested vote (MA14)
53
Q

What power does CDDA 1986 give to courts regarding disqualification?

A

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.

54
Q

What is the maximum period of disqualification under s2 of CDDA 1986 (conviction for an indictable offence)?

A

15 years.

55
Q

What is the maximum period of disqualification under s3 (persistent breaches of companies legislation) of CDDA 1986?

A

5 years.

56
Q

What is the maximum period of disqualification under s4 of CDDA 1986 (fraudulent trading or general fraud)?

A

15 years.

57
Q

What is the maximum period of disqualification under s5 of CDDA 1986 (failure to comply with filing requirements 3x in the last 5 years)?

A

5 years.

58
Q

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)?

A

2 to 15 years.

59
Q

What is the maximum period of directors and shadow directors disqualification under s8 of CDDA 1986 (disqualification in the public interest)?

A

15 years.

60
Q

What is the maximum period of directors and shadow directors disqualification under s9A of CDDA 1986 (breach of competition legislation)?

A

15 years.

61
Q

What is the maximum period of disqualification under s10 of CDDA 1986 (participation in wrongful or fraudulent trading)?

A

15 years.

62
Q

Does CDDA 1986 apply to de facto directors too?

A

Yes, it does.

Business and Employment Law (16 decks)

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