Appointment and Removal of Directors Flashcards
Who is responsible for appointing directors under the Model Articles?
A) The board of directors only
B) The shareholders only
C) Either the board or the shareholders
D) The company secretary
C) Either the board or the shareholders
Explanation:
Under Model Articles 17(1), directors can be appointed either by the board or by ordinary resolution of the shareholders. However, most companies allow the board to handle appointments as it is more efficient.
What is the minimum number of directors a private company must have under CA 2006?
A) One
B) Two
C) Three
D) There is no minimum requirement
A) One
Explanation:
Under s 154 CA 2006, a private company must have at least one director, while a public company must have at least two.
What document must be kept at a company’s registered office for inspection if a director has an employment contract?
A) The company’s Articles of Association
B) The director’s service contract
C) The director’s personal tax records
D) The director’s shareholder agreement
B) The director’s service contract
Explanation:
Under s 228 CA 2006, companies must keep service contracts (or a written memorandum of their terms) available for inspection at the company’s registered office.
What is required for the shareholders to remove a director under CA 2006?
A) A special resolution
B) An ordinary resolution with special notice
C) A unanimous shareholder agreement
D) Approval from the board of directors
B) An ordinary resolution with special notice
Explanation:
Under s 168(1) CA 2006, shareholders can remove a director by ordinary resolution, but under s 168(2) CA 2006, they must provide 28 days’ special notice.
A company with Model Articles wants to appoint a new director. What is the fastest way to do this?
A) The shareholders pass an ordinary resolution
B) The company secretary appoints the director
C) A unanimous shareholder agreement is signed
D) The board of directors passes a majority vote at a board meeting
D) The board of directors passes a majority vote at a board meeting
Explanation:
Under MA 17(1)(b), the board can appoint a director by majority vote, making this the quickest method unless the Articles provide otherwise.
A director of a public company is refusing to step down despite poor performance. What can the shareholders do?
A) Call a general meeting and pass an ordinary resolution with special notice
B) Remove the director by board resolution
C) File a complaint with Companies House
D) Demand the director resign through a written shareholder resolution
A) Call a general meeting and pass an ordinary resolution with special notice
Explanation:
Under s 168 CA 2006, shareholders can remove a director via an ordinary resolution with 28 days’ special notice. The board itself cannot remove a director unless the Articles allow it.
What is the effect of a director being disqualified under the Company Directors Disqualification Act 1986 (CDDA 1986)?
A) They cannot act as a director for up to 15 years
B) They can remain a director but cannot vote at board meetings
C) They can act as a director if shareholders approve
D) They must reapply for approval from Companies House
A) They cannot act as a director for up to 15 years
Explanation:
Under CDDA 1986, a director can be disqualified for up to 15 years for misconduct, such as fraudulent trading or wrongful trading. Acting as a director while disqualified is a criminal offence.
A company director is declared bankrupt. What happens to their directorship under Model Articles?
A) They automatically cease to be a director
B) They remain a director unless removed by shareholders
C) The board of directors must pass a resolution to remove them
D) They must resign within 28 days
A) They automatically cease to be a director
Explanation:
Under MA 18, a director automatically ceases to hold office if they become bankrupt or enter an Individual Voluntary Arrangement (IVA). No formal shareholder resolution is needed.
A company has three shareholders who own 40%, 30%, and 30% of the shares, respectively. They want to remove a director using an ordinary resolution. Who must support the resolution for it to pass?
A) The 40% shareholder alone
B) Any two shareholders together
C) All three shareholders must agree
D) The director must approve their own removal
B) Any two shareholders together
Explanation:
An ordinary resolution requires a simple majority (over 50%). The 40% shareholder alone cannot pass it, but the 30% + 30% shareholders together have 60%, which is enough.
A company’s Articles say nothing about director appointment. The company wants to add a clause requiring shareholder approval for all director appointments. What must be done?
A) Pass a special resolution to amend the Articles
B) Pass an ordinary resolution at a general meeting
C) The board can simply decide to follow this rule
D) File a form at Companies House without a shareholder vote
A) Pass a special resolution to amend the Articles
Explanation:
Under s 21 CA 2006, a company must pass a special resolution (75% shareholder approval) to amend its Articles, including changing the procedure for appointing directors.
