Chapter 8 Flashcards
Members have the right to
Be sent a copy of accounts and reports
Require directors to call a gm
Appoint a proxy
Directors actions/ Matters that requires members approval and what are the consequences of these are breached
Directors service contract with term of 2 years or more - Can be terminated
Substantial property transactions where a director aquires non cash assets from a company - Transaction is voidable unless members give approval within a reasonable period.
Loans to directors, approval required for any loan by a company to director or any security guarantee - same as above
Approval required for payments to be made on loss of office or retirement apart from <£200 - Payment is held on trust for company. Any director that authorised payment is liable to indemnify company of any loss
Foss and Harbottle
Foss sired directors of company for defrauding company by selling land to it at an inflated price - companies was in bad state at the time and efforts call a general meeting failed
Action must be dismissed as company has to submit claim themselves as they are a separate legal entity at a general meeting which would’ve been a majority decision. So minority shareholder (Foss) didn’t have a case
Exceptions to Foss v Harbottle rule (minority powers)
Cancellation of variation of class right if they have more than 15% of class of shares
Right to call a company meeting and notice of members resolution if more than 5%
Payment out of capital by a private company for redemption or purchase of its shares - any shareholder can prohibit this
Registration of limited company to unlimited - any shareholder can stop this
To bring about a derivative claim (by SH against directors) a SH must fisty make out a ‘prima fair’ case to court and obtain permission to continue the claim
The court will consider the following
-if member is acting in good faith
-importance other members may place on issue
- whether ratification by test it company is likely
- whether company had already decided not to pursue claim
- whether SH can pursue claim in own right
- views if members with no personal interest in matter
Unfairly prejudicial conduct
Any SH or SOS can apply to Cory that the majority SH are acting in a way that is unfairly prejudicial to minority SH
Consequences of a Unfaitly Prejudicial Conduct
- courts could regulate future control of company
- authorise any person to bring legal proceedings on behalf of company
- requiring company to do something they omitted to or to stop doing something complained about
- make alterations to articles
Just and equitable winding up
A member that is unhappy with directors or controlling shareholders over management of company may petition court for a winding up on tha grounds that it is just an equitable to do so
AND
There is no other remedy
Examples Where petition for winding up of a company is successful
- where company was formed for an illegal purpose
- where there is a company deadlock in management of affairs
Where directors flip Bradley withhold information leading to a loss of confidence
Company director calling a general meeting
Must give 14 days clear notice to all SH AND D
Including the time page and indication of key points
Members with more than 5% shared calling a general meeting
Can also specify a proposed resoloution
Directors have 21 days to call this meeting which must be held 28 days of the notice
Auditor calling a general meeting
Who gives notice of resignation accompanied by a statement of why
Courts calling a general meeting
Whether on own notion or required of SH
PLC in crisis calling a general meeting
Directors of PLC must call a General meeting when the net assets fall to half of share capital
AGM must have how many days notice
21 days notice and called no more than 6 months after accounting reference date
Business of AGM
Appointment of directors and auditors
Approval of accounts
Approval of dividend
Ordinary resolution
More than 50% of voters
Any business for which a SR isn’t specifically required
Special Resoloution
> 75% of voters
Where it is specifically required by articles for example
-change of name
-alteration of articles
-reduction of share capital
-winding up of a company
Written resolution
Same majority that would’ve been needed in a general meeting
Any matter except removal of director and auditor
Proceedings of meetings
Can’t proceed unless there is a quoram is present
Voted cast by hand where one person equals one vote
Unless by poll vote where 1 share = 1 vote
Records must be kept for 10 years and available for inspection
De factor directors
Anyone who acts as a director despite not binge appointed formally as one
Shadow director
Unknown director who acts in shadows and instructs other directors
Alternate/proxy director
Articles usually provide that a director may appoint an alternate to act on their behalf
Non executive director
Not employees of the business and act as a control to generally attend board meetings to make sure directors are doing what they should be.
Chairman of the BOD is non exec
Rules of directors
16+
Mustn’t have been disqualified from acting either by the company directors disqualification act or by orders of assumption
Every company is to have at least 1
Restrictions to directors power
Alteration of articles and reductions of capital require special resoloution
Articles : Articles may set a max amount to be borrowed for example
Members: can Excersise over directors powers
-special resoloution to alter articles
-by removing directors from offices
