Authority/powers of Directors

Question 1

Authority of Company directors

Answer 1

Directors are agents of the company meaning they have authority to enter into binding contracts on behalf of the company. Directors of a company may exercise all the powers of the company (subject to articles of association) and this power is given to the board as a whole. However individual directors can’t bind the company without being authorised in some way.

Question 2

3 Authorities of individual directors (express,implied,ostensible)

Answer 2

Express authority (delegation of the Board’s power to one or more directors → the company is bound by any contract entered into by the person to whom the power was delegated)

Implied authority (the person’s authority flows from their position; Outsiders can safely assume that a person appointed as a managing director has all the power usually exercised by a person acting as a managing director → the company is bound by the contracts)
	Hely-Hutchinson v Brayhead Ltd (1968)

Ostensible (apparent) authority (the individual director has neither express nor implied authority; the director is held out by the other members of the Board as having the authority to bind the company → the company is bound by the contracts)
 Freeman and Lockyer v Buckhurst Park Properties (Mangal) Ltd (1964)

Question 3

How can directors power be restricted (4 ways)

Answer 3

(Statutory general, statutory specific, articles of association, members)

Question 4

Statutory general

Answer 4

Directors can exercise powers only “for the purpose for which they are conferred (s.171). They will have to act in accordance with the companies constitution.

Question 5

Statutory specific

Answer 5

For example, alteration of the articles/reduction of capital needs a special resolution, which the directors must secure from the shareholders in general meeting before they can act. Special resolutions will have to be passed by shareholders in General Meetings and require 75% approval.

Question 6

Articles

Answer 6

For example the articles may set a maximum amount that the directors are entitled to borrow, any greater amount needing approval of the company in general meeting. Articles can contain additional restrictions. Can contain provisions related to the directors powers/authority.

Question 7

Members

Answer 7

Can re-allocate the powers between the board and the general meeting by passing a special resolution to alter the articles / removing directors from office. These powers are included in the articles of association and can be changed by a special resolution.