Chapter 2 - THE DIRECTORS Flashcards
What are the two main types of Company Directors?
Executive and Non-Executive
What is the main duty of a Director?
Manage a company on behalf of its members
Who has the power to appoint and terminate directors?
Members
Can directors appoint additional directors? What extra step is reqd for listed companies?
Yes
Listed companies must have appointments validated by members at the next AGM
Does a director have to be called a ‘director’?
No - can be any person occuying the position. EG CEO
What is an Executive Director?
A member of the executive team / senior management that also sits on the board as a director
Can a company be a director?
Yes, not just individuals
What is the basis for appointment of an Executive Director?
Formal appointment, separate to employment contract
Where are new directors appointed?
At Board meetings
What are the 3 key factors in the role of an NED?
Contribute skills and experience otherwise not available within; challenge; provide BALANCE
Do NEDs have a service contract?
No; letter of appointment
What must an NED have to ensure they can fulfil their duties, namely providing balance?
Independence
Under the Governance Code how many independent NEDs should be on the board?
Half of the directors, not including the Chair
What main factors might impair a NED’s independence?
Long association with the company (9 years)
Being an employee
Share options
Recent material business interest
Cross-directorships
Represents a significant shareholder
Is a shadow director deemed a director by the Companies Act? (s 251)
Yes - whilst not formally appointed, acts as one and therefore deemed to be a director for all purposes. They are as liable as the others.
Is a De Facto director deemed a director by the Companies Act?
Yes - even though they are not formally appointed they hold themselves out to be a director
What guidance allows for the appointment of alternate directors?
Model Articles - subject to Board approval; but not Articles for private and LBG companies.
Are alterates subject to the same rules?
Yes
Do alternates get entered in the register of directors?
Yes - form AP01
What are the key differences between an executive director and an NED?
Executive directors are employees usually full-time and responsible for implementing company strategy, NEDs are not
employees, usually part-time and responsible for setting corporate goals and strategy
Which statutory registers should be updated on the appointment of a director?
Register of directors
Register of directors’ residential addresses
What information should be obtained from the new director?
Full name
Date of birth
Service and residential address (if different)
Nationality
Occupation
Who cannot be appointed as a director?
Person under the age of 16
A disqualified person
A bankrupt
An auditor or employee of the audit firm
A director of an insolvent company cannot be appointed as a director of a company with a prohibited name without
consent of the court
Anyone not meeting any specific criteria in the Articles
What are the seven codified duties of directors?
To act within their powers
To promote the success of the company
To exercise independent judgement
To exercise reasonable care, skill and diligence
To avoid conflicts of interest
Not to accept benefits from third parties
To declare interests in any proposed transaction or arrangement
