Chapter 2 - The Directors

Question 1

What are the key differences between an executive director and an NED?

Answer 1

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

Question 2

Must directors have the word ‘director’ in their job title?

Answer 2

Not a requirement

Question 3

What criteria prevent an individual from being independent?

Answer 3

Long association with the company 
Being an employee
Share options
Recent material business interest 
Cross directorships
Represents a significant shareholder

Question 4

What form should be used to notify the Registrar of the appointment of an individual as a director?

Answer 4

Form AP01

Question 5

Which statutory registers should be updated on the appointment of a director?

Answer 5

Register of directors

Register of directors’ residential addresses

Question 6

What information should be obtained from the new director?

Answer 6

Full name
Date of birth
Service and residential address (if different) 
Nationality
Occupation

Question 7

Who cannot be appointed as a director?

Answer 7

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

Question 8

What are the seven codified duties of directors?

Answer 8

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

Question 9

Do directors have unfettered authority to exercise the company’s powers?

Answer 9

No. Their authority is subject to any provisions in the Articles, their service contract and any authority limits adopted by the board

Question 10

Can directors delegate any of their powers and duties?

Answer 10

Yes to committees of the board

Question 11

How many directors may be appointed?

Answer 11

Any number subject to any maximum set out in the Articles

Question 12

Under what circumstances can a director be disqualified?

Answer 12

For unfitness
On conviction
For breach of statutory obligations 
For fraudulent or wrongful trading In the public interest
By voluntary undertaking
On competition grounds

Question 13

Do the remaining directors need to approve the resignation of a director?

Answer 13

No

Question 14

How soon must notification of the vacation of office by a director be notified to Companies House?

Answer 14

14 days

Question 15

How many directors should retire at the first AGM of a public company?

Answer 15

All

Question 16

Why is succession planning important?

Answer 16

To ensure an orderly succession and to maintain the necessary balance of skills, experience, diversity, independence and balance

Question 17

If a listed board has two executive directors, a chairman and a non- independent NED, how many independent NEDs must be appointed?

Answer 17

Three

Question 18

Is positive discrimination permitted to address board diversity imbalance?

Answer 18

No

Question 19

Can any company take out directors’ indemnity insurance?

Answer 19

Yes

Question 20

Can a director be indemnified against personal liability to pay fines and damages?

Answer 20

No

Question 21

Can the details of any indemnity insurance be kept secret?

Answer 21

No, must be available for inspection by members

Question 22

Can a person be co-opted to a board without their consent?

Answer 22

No