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ACCA F4 LW > Chapter 18 Company Directors > Flashcards

Chapter 18 Company Directors Flashcards

1
Q

How can we define a company’s director?

A

Any person occupying the position of director(have power and responsibilities),by whatever name called

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2
Q

How can we differentiate between De jure and De facto directors?

A

De jure directors are expressly appointed by a company while De facto directors are held out(continue to operate) by a company as a director not validly appointed

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3
Q

How shadow directors are different from de facto directors?

A

People are rarely aware of shadow directors existence ,these are not even held out by the company but have influence on decision making

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4
Q

Who can be appointed as an alternate director?

A

Another director or an outsider can be an alternate director

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5
Q

A director can also be an employee of their company.

A

True, the articles usually make a specific provision for this

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6
Q

Directors having additional managerial duties as employees may have special titles,does this affect their personal legal position?

A

No

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7
Q

NEDs are involved in company’s governance or management?

A

Involved in company’s governance

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8
Q

What are the main tasks of NEDs?

A

1)To give an independent view on board’s deliberation
2)Help board provide the company with effective leadership
3)Ensure continuing effectiveness of EDs and management
4)Ensure high standards of financial probity on part of the company

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8
Q

What are the responsibilities of a CEO?

A

Carry out overall day to day management functions and has a special position and wider apparent powers than any other director

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9
Q

How many directors a public company must have?

A

At least 2

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10
Q

What is the role of chairman?

A

Responsible for leading the board and ensuring its effectiveness

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11
Q

How subsequent directors are appointed?

A

1)By ordinary resolution
2)By decision of the directors

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12
Q

Is it necessary to propose separate resolution for the election of each director?

A

Yes

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13
Q

Within how many days a company should give a notice to registrar of any change among directors?

A

Within 14 days

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14
Q

Is it lawful to give non contractual compensation to directors?

A

Lawful only when it is approved by members of the company in general meeting

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15
Q

Approval for payment of contractual compensation is necessary or not?

A

Not necessary

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16
Q

What are the areas that a director’s remuneration report must cover?

A

1)Details of individual director’s remuneration package
2)Company’s remuneration policy
3)Role of board and remuneration committee in deciding the remuneration of directors

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17
Q

What is the position of members vote on director’s remuneration report?

A

The vote is purely advisory and does not mean that the remuneration should change if the resolution is not passed

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18
Q

After expiry for how many years director’s service agreement must be retained?

A

Must be retained for one year after expiry

19
Q

How a director can be removed from office?

A

By an ordinary resolution at a meeting of which special notice to the company has been given by the person proposing it

20
Q

What are the restrictions on power to remove directors?

A

1)Shareholding qualification to call a meeting
2)Shareholding to request a resolution
3)weighted voting rights
4)Class rights agreement

21
Q

What are the different grounds a court may make a disqualification?

A

1)A person is convicted of an indictable offence
2)A person persistently in default in relation to provision of company legislation
3)Fraudulent trading
4)Involvement in competition violation
5)Wrongful trading

22
Q

How a court will determine that a director is unfit to be concerned in management of the company?

A

1)The extent to which the person is responsible for the company breaking the law
2)The extent to which he is responsible for causing the company to become insolvent
3)Nature and extent of loss caused by his conduct

23
Q

What are the different disqualification periods?

A

1) 2 to 5 years(conduct not very serious)
2) 6 to 10 years(conduct was serious)
3) Over 10 years(in particularly serious cases)

24
Q

When a disqualified director acts as a director what will be the consequence?

A

It is a serious offence and when committed directors are personally liable for the debts of the company

25
Q

Ordinary commercial misjudgement is sufficient or not for disqualification?

A

Not sufficient

26
Q

Are the directors authorised to take any decision?

A

They may take any decision which is within the capacity of the company unless the Act or the articles requires that the decision should be taken by the members

27
Q

How a director’s power can be restricted?

A

By statute or by articles

28
Q

Director’s decision can be challenged or not when they clearly have the necessary power?

A

Yes when they exercise their power in the wrong way

29
Q

What will be the action of court if directors do not use their power properly?

A

The court will set aside their powers unless the shareholders ratify the director’s action by ordinary resolution

30
Q

CEO has apparent authority as agent of the company to make business contracts.

A

True, no other director has that apparent authority as a director

31
Q

What is the procedure for the termination of CEO?

A

Same like that of any other director

32
Q

When do directors can bind the company in contracts?

A

When they have actual or usual authority

33
Q

Directors owe their duties to?

A

To the company not members

34
Q

What are the statutory duties of a director?

A

1)Act within their powers
2)Promote the success of company
3)Exercise independent judgement
4)Exercise reasonable care, skill and judgement
5)Avoiding conflict of interest
6)Not accept benefits from third parties
7)Declare an interest in proposed transaction or agreement

35
Q

What is a fiduciary duty?

A

Duty imposed upon certain persons because of their position of trust and confidence in relation to others

36
Q

Is it necessary to exclude the director or connected member from the vote where a resolution proposes to ratify their acts which are negligent?

A

Yes

37
Q

What are the two parts of reasonableness test?

A

1)An objective test
2)A subjective test

38
Q

What is an objective test?

A

Did the director act in a manner reasonably expected of a person performing the same role?

39
Q

What is a subjective test?

A

Did the director act in accordance with the skill, knowledge and experience that they actually have?

40
Q

What is the consequence of directors accepting benefits from third party?

A

They potentially create a conflict of interest and will also be in breach of their duty

41
Q

How a director can disclose their interest in a proposed transaction before the company enters into it?

A

1)By written notice
2)By general notice
3)Verbally at a board meeting

42
Q

Is it sufficient to discharge the duty when directors made disclosure of interest only to members?

A

No, directors must also disclose the nature and extent of their interest to other directors as well

43
Q

What are the consequences of breach of duty by directors?

A

1)Damages payable to company when it suffered a loss
2)Restoration of company property
3)Repayment of any profit made by the director
4)Rescission of contract

44
Q

Directors are liable or not for the actions of fellow directors?

A

No, but they have a duty to inform members when they are aware of it

45
Q

What will happen when a director do not inform members about breach of duty by another director?

A

The director is liable for their own negligence not directly for the misconduct of other director

ACCA F4 LW (11 decks)

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