👔Business 3: Co Decision Making Flashcards
3 categories of decision
- Board of Directors via Board Resolution in Board meeting
- Shareholders alone via SH resolution in general meeting
- Reserved for the Board, but need SH approval
Can shareholders override or retrospectively alter a board decision
no
What decisions are made by the board
- Commercial decisions(e.g simple contracts – purchase, sell, supply, transactions)-MA3 directors general powers
- Changing registered office
- Allotting shares (in priv co with one class of share)
- Borrowing money (no cap)
Changing accounting reference date
Rules for changing the companies registered office
Board resolution
Prev address remains valid for service for 14 days, co must move records to new address in this time
New address take affect when change registered by Registrar of Cos
What does “A company may or shall [with no mention of resolution]” suggest?
board decision [subject to limitation in articles]
2 types of shareholder resolution
Ordinary resolutions: OVER 50% (simple majority) of the votes cast at shareholders gen meeting must be In favour
Special resolutions: 75% votes must be in favour (s283 CA 2006)
What decisions are for the shareholders alone to make?
Includes decisions…
a. Affecting company’s constitution (changing name, amending articles, registering as Plc)
b. regulating dirs (loans, removal, long term service contract, payment for loss of office)
Requirements to change co name
To file at CH:
1. copy of special resolution 2. NM01 form (+fee)
Requirements to change articles
Special resolution
Must be done bona fide for the benefit of the company as a whole
transparency requirements for loan to a director
a memorandum setting out terms of loan and cos liability must be made available for inspection at cos RO for 15d prior to GM at which the OR will be proposed AND at GM itself.
If written resolution, a copy of the memorandum must instead be sent out with the written resolution and does not need to be available for inspection at the company’s registered office.
EXCEPTIONS to requirement for OR for loan to a director
- Loans up to 50k: for business purposes/enabling the director to properly perform their duties
- Defending civil/criminal proceedings in relation to Co/ associated Co
- Defending regulatory proceedings/investigation by a regulatory authority
- Minor and business transactions not exceeding 10k
Effect of loaning money to a director with no OR and no exceptions apply
○ Voidable if passed without ordinary res
○ Director who leaned money/authorised transaction liable to account for loss to company for any gain
UNLESS affirmed within reasonable time by the company (or its holding company)
How is a director removed
OR of SH
When can directors remove another director?
ONLY of theres powers in the articles (NOT) model articles, otherwise SH via OR
Rules for payment for loss of office of director
Payments of over £200 (other than those a dir is legally entitled to) need SH approval via OR
‘payment’-inc where dir selling their shares in co and the price is in excess of the price other shareholders could have obtained
Also applies to:
○ Payments to past dirs
○ Payments to person connected to dir
○ Payment to any person at the director of/for the benefit of a dir or a person connected with a dir
Formalities:
Memorandum containing particulars must be available at RO for 15d prior to GM and at GM
If WR-send memorandum to SH with WR/before WR is circulated
Effect if a payment for loss of office to a director is made in breach of the rules?
○ money is held on trust for co
○ Any dir who authorised payment is jointly and severally liable to indemnify co that made the payment for any loss resulting from it
Wording which suggest a SH resolution is needed for a decision
‘A company …by members/ordinary/special resolution’
When it’s not stated what type of resolution is needed, what is presumed? (ie. “A company/members…may by resolution”)
where a decision states this without specifying what type of resolution, it requires an ordinary resolution unless the articles say otherwise
What decision is reserved for the board but needs SH approval
Substantial property transactions, Shareholders consent by ordinary resolution needed
What is a SPT
- a director or someone connected with a director
- buys from or sells to the company
- a non- cash asset
- of substantial value.
SPT: who is a person connected to a director?
Family:
spouse/civil partner;
child/stepchild;
parents;
any person who lives in an enduring relationship with the director as their partner
children of a person who lives in an enduring relationship with the director as their partner. NOT partner, parents, aunts, grandparents
OR co in which the director/person connected: – own/ owns at least 20% of the body corporate’s shares – OR is/ are entitled to exercise/control the exercise of more than 20% of the voting power at any GM of the co.
NOT a director of both but a dir of one and SH of other
SPT: does a ‘non cash asset’ include a loan?
Yes
SPT: what does ‘substantial value’ include?
over £100k
OR over £5k and more than 10% of company’s net asset value (figure for ‘net assets; on companies balance sheet)
effect of doing a SPT without SH consent via OR
□ Transaction voidable by co
□ Following may be ordered to account to/indmnify co:
1. dir of the company (or its holding co) with whom the company entered into the arrangement;
2. connected person with whom the company entered into the arrangement
3. dir who authorised the arrangement/transaction
When is it OK that a SPT hasn’t got SH approval?
- Co not UK registered
- Buying back shares from dir
- For transactions with members or other group companies where :
□ co in question is a wholly owned subsidiary of any other company (just need OR from parent co)
□ a transaction between a company and a person in his character as a member of the company
□ a transaction between a holding company and its wholly owned subsidiary; or
□ a transaction between two wholly owned subsidiaries of the same holding company.
Admin for SPT
none
Company decision making procedure
1.BM 1(Board resolve to agree draft terms of contract AND call GM or circulate WR)
2. GM or WR (SH resolve to approve entry into contract)
3. BM 2 (Board resolve to enter contract and to authorise D to execute contract)
4. Admin
When is a board meeting not needed
Dirs can exercise powers unanimously without meeting as long as they indicate they have a common view ( in form of a resolution in writing or any other method)
Calling a BM
Any director may call
Company secretary
Usually chair
Notice for a BM
Must give notice
To: ALL directors
Length: Reasonable (q of fact, depends on size
Form: any form, inc, virtual as long as Dirs can communicate to the others any info/opinions on an particular item of business
Inc: time, date and place MA 9(2)
Effect if a director isnt given notice of a board meeting?
those not given can demand another meeting be held within a reasonable time
Quorum for board meeting (inc conflict)
Min 2
onflict of interest: Dir with cant count in quorum on that specific matter where proposed decision is concerned with actual/proposed transaction with CO in which Dir is interested
Conflict can be authorised by dirs as long as doesn’t count in quorum
Directors Declaration of Interests for board meeting
Dirs must declare (to other directors) the nature and extent of any direct or indirect interest in a proposed transaction to which Co is party (cant disapply)
UNLESS
1. it cannot reasonably be regarded as likely to give rise to a conflict of interest.
2. Other dirs already aware.
3. It concerns terms of a service contract that have been/are to be considered by a meeting of the dirs
BUT gd practice to declare
voting in a general meeting
Simple majority (over 50% of those present) by show of hands
* Dirs with interest cannot vote on that matter unless MA 14 dissaplied
What happens if theres a deadlock in a general meeting?
Negative view prevails and res defeated.
If chair, they have casting vote and can use in favour
What should be included in board minuets to protect a director from allegations
That they considered whether each proposal promotes the success of the company for the benefit of the members of a whole.
Admin after a board meeting?
BM mins kept at registered office or SAIL for 10y (faliure=criminal offence)
see if Co registers need updating:
Register of:
* members
* directors
directors’ residential addresses
* PSC
External
Forms to Companies House? (CA 2006 (depends on transaction)
When MUST a general meeting be held annually?
Public companies
Who can call a GM?
- Dirs at BM
- SH with 5% voting rights (dirs call within 21d, occur within 28d)
SH can also can require co to circulate statement of up to 1k words on subject matter of res
-request must state the general nature of the business to be dealt with s303(4)(a)
Notice period and requirements for calling GM?
14 clear days (+48h for email/post)
To: Every Dir and SH (s310) auditor if there is one
Inc: Time, date, place, general nature of business to be conducted
-Exact wording of any special res
-Statement notifying every SH of right to appoint poxy
Form: written, hard copy, electronic, website, combo
Who can call a GM on short notice?
Majority of SH who hold 90% voting rights (95% for public cos)
4
When CANT a GM be held on short notice?
-loan to dir
-buyback of shares
-dir long term service contract
-removal of dir
What is special notice of a general meeting?
For removal of a director
*given at least 28 clear days before GM
*When Co notifies SH of the GM, must also inform of res to remove dir
*Co must notify Dir immediately by sending copy
*Dir entitled to be heard at GM/send written representations to Co who will send to SH
Quorum of general meeting
Min 2 (unless only 1 SH)
Can count if have interest
Deceleration of interest for general meeting
None
Ways of voting at general meeting
Show of hands (Default)-1 vote per SH
Poll vote (overrides show of hands)
-1 vote per share, -Must be present
Can you vote if you have a personal interest at a general meeting?
CAN vote if have personal interest
EXCEPT casting vote NOT counted if:
-res to buy back some/all SH shares
-or OR to ratify Dirs breach of duty under s239 CA where Dir is also SH
Does the chair of a general meeting have a casting vote
No unless articles amended
Who can demand a poll vote
Chair
*Dirs
*2 or more SH with right to vote on the res
*SH holding at least 10% of the voting rights of SH having right to vote on that res
When can a poll vote be called
-Can be called before/during GM.
Admin requirements after GM/WR?
Internal
GM mins kept at RO or SAIL for 10y (s355) (Failure= crim offence
Company registers (at RO or SAIL) updated if eg. Register of:
* members
* directors
directors’ residential addresses
* PSC
External
Forms to SH?
If special resolution, copies to CH within 15 days
Can the right to call a poll vote be excluded in the articles?
No
What is the lapse date (deadline for responding) of a written resolution?
midnight of 28th day from circulation unless articles state otherwise
When is a GM/WR not needed for a decision that usually requires one?
All SH in unanimous agreement
Who can decide to circulate a written resolution
- Dirs via board resolution
- Any SH with at least 5% voting rights can demand board circulate WR (s292)
articles can reduce but cant increase above 5%
Process for SH demanding dirs circulate a written resolution
SH can inc statement <1000 words on the subject matter (s 292(3))
Co must circulate to all eligible SH within 21 days
SH who demanded must pay the cos expenses in complying with the request (S294)
What form can a written resolution be in?
in person, post, email, website
Who must a written resolution be sent to?
all eligible members [and auditors if one]
‘Eligible member’ =the SHs who are entitled to vote on the res as at the circulation date of the res
Voting on a written resolution
Passed when the required majority of eligible members have signified agreement (by lapse date) (unlike GM, where only the votes of those PRESENT and VOTING count)
1 vote per shar
What are a companies annual responsibilities
- Adequate accounting records giving a true and fair view of the state of affairs at Co as at end of each financial year
- Dirs prep directors report for each financial year
EXCEPT priv cos classed as small co/micro-entity-co with balance sheet less than £5.1 mill, turnover less than £10.2 mill, less than 50 employees in particular financial y
Deadline to file annual accounts
○ Priv: File to CH within 9mo from end of accounting period
○ Pub: File to CH 6mo from end of accounting period
All cos: file confirmation statement on form CS01 within 14d from cos confirmation date (anniversary of incorporation)
How may a company secretary be removed from office?
□ Resignation
□ Dirs can remove by BR
(May have contract setting out consequence of removal (ie. Damages for breach of contract))
Admin and notification requirements for appointment/ removal of company secretary
□ Appointment: AP03 to registration within 14d appointment
□ Must keep register of secretaries with specified particulars (if have sec) (Priv Cos can choose to not have their own register of secretaries but ensure info is files/up to date at CH)
□ Co must notify Registrar within 14d of change in particular of co sec kept in register of secs
Is an auditor always mandatory for companies
yes
Requirements to be a company auditor
Qualified (certifies/chartered accountant)
Independent (not connected with anyone in co)
What companies are not required to file annual accounts
Exempt if small company
§ Cos which don’t trade (dormant cos) permitted to file abbreviated accounts and are exempt from audit
What will an auditors report do/ say about a company?
Report must state whether, in the auditor’s opinion, accs have been prepared properly and give a true and fair view of co
Main duty of auditor
prep a report on cos annual accounts, to be sent to its SH
Appointment of company auditor
□ Dirs of priv co app first auditor
□ SH then have power to app via OR
Auditor of priv co deemed to be reappointed automatically annually (unless articles amended)
Liability of auditors
□ Do NOT owe duty of care to SH/potential new SH when conducting annual audit
□ Needs to be proximity between parties for liability to be imposed
□ Can be sued for negligence by co
□ Criminal offences:
1. knowingly or recklessly including misleading, false or deceptive material in the auditor’s report
2. omitting certain statements from the report which are required to be included by the CA 2006
Removal of company auditors
Resignation at any time by notice in writing to cos RO
SH can remove any time via OR (must give special notice)
What must an auditor do whenever they cease to hold office?
must deliver statement to co explaining circumstances connected with ceasing to hold office
