BL - Directors LT Contracts

Question 2

What is a long-term contract?

Answer 2

Any director’s service contract which is, or may be, for a guaranteed period in excess of two years.

Question 3

What is required to approve a long-term service contract?

Answer 3

Shareholder approval by ordinary resolution with
special notice of 14 days resolution

Question 4

What is the guarantee in a long-term service contract?

Answer 4

• a period during which the contract is to continue other than at the instance of the company, and
• during this time the company either cannot terminate the contract or can only terminate in specific circumstances
  OR
• the period of notice to be given by the company Takes you over the two year limit

It will also apply to an aggregate of any periods covered by .

Question 5

What happens if a company approves a long-term contract without the necessary approval?

Answer 5

• the provision will be void to the extent of the contravention, and
• the contract will be deemed to contain a term entitling the company to terminate it at any time by the giving of reasonable notice.

Question 6

What is the exception to s.188 Long-term contracts requiring approval?

Answer 6

Approval is not required by the members of any company which is a wholly owned subsidiary of another company.

Question 7

What is the process to pass an ordinary resolution for a long-term contract by GM or Written resolution?

Answer 7

GM
a memorandum setting out the proposed contract must be made available for inspection by members of the company both:

a) at the company’s registered office for not less than 14 clear days ahead of the date of the GM; and

b) at the GM itself.

WRITTEN RESOLUTION
- doc sent out with WR
- There is no 15-day requirement for a written resolution.