BLP 4 - Directors and Shareholders Flashcards
Who can be a director
Private - at least one
Public - at least two
Do not have to be natural persons, but need at least one (over 16).
One or more corporate directors, will send individual to board meetings to discharge functions.
MA3 - power to run company.
Shareholders cannot remove decisions retrospectively of directors.
Types of director
MA19 board has power to decide what services companies directors undertake.
Executive directors - also have employment contract.
Non service agreements do not receive salary.
Chairperson -
passing board resolution to appoint.
De facto directors -
act as one although not formally appointed.
Shadow director -
directors are accustomed to act, but not formally appointed.
Sole director -
can make decisions in board without quorum.
Appointment of directors
Take office on certificate of incorporation being issued on form 1N01.
MA -
appointed by board or by ordinary resolution
Restrictions on being a director -
MA18 - cease if bankruptcy order made.
Or doctor gives written opinion.
Administrative requirements
Notify companies house within 14 days.
By filing form AP01 (individual) or AP02 (corporate director).
Must also enter on register of directors and residential address.
Directors authority
Agents with company being principle.
Express actual authority - director has consent
Implied actual authority
director acted way in past and board has not tried to stop.
Apparent -
Representation by words or conduct that acting within company authority.
If does not have personally liable.
Service contracts
MA3 (general) and MA19 (specific renumeration)
Guaranteed term of more than 2 years - long-term service contracts.
Approved by ordinary.
If has powers to terminate in under 2 years will not be long-term.
If small company, not able to as director has personal interest.
Alter articles by special resolution.
Or temporary suspend MA14 by ordinary resolution.
If ordinary - must keep copy of memorandum setting out terms of contract at reg office for 15 days prior to general meeting and at meeting itself.
If enter without
Guaranteed term void
Rest enforceable.
Capable of termination on reasonable notice.
Must be available for inspection at registered office during term and until year after termination.
Right to inspect without charge for shareholders and within seven days.
Ending
Resigns -
Form TM01. or TM02 if company.
within 14 days of resignation.
If removed may not end service contract unless in repudiatory breach.
Removal -
ordinary resolution
Special notice at least 28 days before general meeting at which ordinary proposed.
Must inform director and shareholders.
If not at least 14 days before general meeting by advertisement in newspaper.
If meeting called 28 days or less, deemed to have been properly given.
Bushell v Faith clause -
e.g. ten times more votes than usual.
Or shareholder agreement
Notification requirements
Must keep register of directors
DOB, address and registered office.
Available to shareholder without charge or to individuals for fee.
Residential address of directors
Not open to inspection
Form CH)1 and CH02 used to notify change I particulars for natural persons and corporate directed.
Form APO1 and AP02 used to notify of appointment, filed within 14 days.
TM01 and TM02 -
resignation or removal
14 days at companies house
Duties
CA 2006
s171 - Duty to act within powers
a) act in accordance with constitution
b) only exercise powers for purposes which they are conferred.
Resolutions and agreements not just articles part of constitution.
Must promote companies success -
s171(b)
Duty to promote success - s 172
good faith
Must have regard to;
long-term consequences
interests of employees
need to foster business relationships
impact of operations on community and environment
desirability of company maintaining reputation for high standards of conduct
need to act fairly between members of the company
Subjective test.
Not be found guilty unless not in good faith.
Duty to exercise independent judgment s173 -
Not infringed by acting
a) in accordance with agreement duly entered into by company that restricts future exercise of discretion
b) in a way authorised by the constitution.
Duty to exercise reasonable care skill and diligence - s174
Exercised by reasonably diligent person with
a) general knowledge, skill and experience may reasonably be expected of a person carrying out functions
b) general knowledge, skill and experience director has
Duty to avoid conflict of interest -
s175-
Direct or indirect
Must relate to a contract in which company not involved.
Not breached if authorised.
Not count in vote to authorise infringement however.
Duty not to accept benefits from third parties -
s176 -
Conferred by reason of being a director. No breach if not likely to give rise to conflict of interest.
Duty to declare interest in proposed transaction s177-
must be made before enters into.
Exceptions -
not aware (director treated as being aware of what ought reasonably to be aware of)
cannot be regarded as likely conflict
other directors already aware
concerns terms of service contract.
Consequences
ss 171 - 173 and 175 - 177
Remedies;
account of profits
equitable compensation
recession of contract entered into as direct or indirect breach.
injunction
restoration of property as a result of breach
Ratification
Ordinary resolution.
Director in question not allowed to vote.
Declaration of interest in existing transaction s182
Must declare as soon as reasonably practicable.
Does not apply if already declared under s177.
In contrast though must be made at meeting of directors or by notice in writing sent to all directors or by general notice of interest given at board meeting,
Exceptions -
not aware
interest not regarded as conflict
already aware
service contract.
s188 -
Criminal offence punishable by fine.
Claims against directors of insolvent companies
Wrongful trading
Court may order to contribute if;
gone into insolvent liquidation or insolvent administration
before commencement of winding up of company director knew ur ought to have concluded no reasonable prospect to avoid
was a director at the time.
Defence -
took every step with a view to minimising potential loss to creditors.
Two-step
-director ought to have known
-and steps which they ought to have taken
Against standard of reasonably diligent person having both;
general knowledge and skill expected
general ‘’ ‘’ the director has.
Directors should to minimise;
seek professional advice
limit spending
check accounts
keep records of own actions
Fraudulent trading
On winding up, intent to defraud creditors.
May order contributions.
Brought by liquidator or administrator.
Need to show intention to defraud.
Also criminal conviction.- s993 CA 2006
Misfeasance
Breach of any other fiduciary due.
May be ordered to contribute under s212.
