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Law > Chapter 8 - Companies: Ownership and management > Flashcards

Chapter 8 - Companies: Ownership and management Flashcards

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1
Q

How many directors does a company need?

A

Privatecompany -Min 1

Public company - min 2

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2
Q

What kind of director is a chairman?

A

Non-executive

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3
Q

What is the role of a managing director?

A

Carry out day-to-day management functions

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4
Q

Can directors be removed by ordinary resolution?

A

Yes

Special notice of 28 days must be given

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5
Q

What does the company directors disqualification act 1986 allow the courts to do?

A

Formally disqualify any person from being a director (without the leave of court)

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6
Q

What may constrain director’s powers?

A

Statute

Articles

Members

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7
Q

What are the duties of a director under the Companies Act 2006?

A

Act within powers

Promote success of the company

Exercise independent judgement

Exercise reasonable skill care and diligence

Avoid conflict of interest

Not accept benefits from 3rd party

Declare interest in proposed transaction or arrangement

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8
Q

What happens if there is a breach of a director’s duties?

A

May be required to make good any loss suffered by the company

Contract may be rendered voidable by breach of duty

Property taken by director can be recovered

Joint and several liability if another director is in breach

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9
Q

How must ratification of action be made?

A

By ordinary resolution

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10
Q

Is provision to exempt a director or indemnify them against a breach of duty or negligence void?

A

Yes

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11
Q

How may a court relieve a director of liability?

A

If they think he acted honestly and reasonably

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12
Q

What does wrongful trading only apply to?

A

Where a company goes into insolvent liquidation

Directors knew/should’ve known that there was no reasonable prospect of avoiding insolvent liquidadtion

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13
Q

When does fraudulent trading occur?

A

If there is intent to defraud creditors or any other person

Director must decide to carry on in this way or play an active role

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14
Q

What is the punishment for fraudulent trading?

A

Fine and/or up to 10 years in prison

Civil liability or company’s debts on a winding up

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15
Q

What is the Company Directors Disqualification Act 1986 designed to do?

A

Designed to prevent directors walking away from wreckage of a company with no personal liability

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16
Q

What roles can the court disqualify someone from?

A
  • Director
  • Insolvency practitioner/reciever
  • Company manager
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17
Q

What is the punishment for a serious offence or fraudulent trading in the course of winding up?

A

Mandatory 15 years disqualification

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18
Q

What is the punishment for the persistent default of provisions of company legislation?

A

Up to 5 years disqualification

3 convictions in 5 years is conclusive evidence of persistent default

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19
Q

What is the punishment if director at company became insolvent and conduct indicates that unfit to be concerned in management of a company?

A

Disqualification order of min 2 years and max 15

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20
Q

What does a bankruptcy order do?

A

Automatically disqualifies from acting as director

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21
Q

What offences have directors been disqualified for?

A
  • Insider dealing
  • Failure to keep records
  • Failure to read accounts
  • Loans associated to companies on uncommercial terms to detriment of creditors
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22
Q

What is a member?

A

Subscriber of a company’s memorandum

Any person entered o the register as a member

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23
Q

Can a company be formed with a single member?

A

Yes

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24
Q

What rights do members have?

A

Sent a copy of annual accounts and reports

To require directors to call a general meeting

Appoint a proxy

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25
Q

Who manages and controls a company?

A

Directors manage

Members ultimately control

26
Q

what % is required to have complete control of a ompany?

A

75%

27
Q

What % is required to be given the power to appoint/remove directors?

A

Min 50%

28
Q

Are members required to act for the benefit of the company?

A

No

29
Q

When can the minority take action?

A
  • Where statute provides
  • Derivative action for negligence
  • Breach of duty
30
Q

What is there statutory protection on?

A
  • Variation of class rights
  • Company meetings
  • Notice of members resolutions
  • Registration of limited company as unlimited
31
Q

Who are the director’s duties owed to?

A

Company so company is proper claimant for any breach of duty

32
Q

Can a member bring a derivative claim?

A

Yes, in respect of an actual proposed act/omission by a director that involves negligence/breach of duty

33
Q

How will removal of a company’s auditor on improper grounds be treated?

A

Unfairly prejudicial

Effect of the conduct that is considered

34
Q

What are some examples of case law for unfair prejudice?

A

Exclusion/removal from board

Improper allotment of shares

Inaccurate statement to shareholders

35
Q

What are some examples of case law for unfair prejudice that failed?

A

Failure to pay debts of subsidiary company

Non-compliance with stock exchange rules

36
Q

Will the court intervene in cases of dispute about management?

A

No

May intervene if serious financial damage has been done

37
Q

Is a breach of company law unfairly prejudicial conduct?

A

Not necessarily

38
Q

What are the remedies available to the court for unfair prejudice?

A

Regulating future conduct

Authorising any person to bring legal proceedings on company’s behalf

Requiring company to alter its articles

39
Q

What is the most common type of relief?

A

To order controlling shareholder/company to purchase shares of petitioner at a fair price

40
Q

Who may call a general meeting?

A

Directors
5% of members
Court
Auditor giving notice

41
Q

When must a general meeting be called in a public company?

A

Where the net assets fall to half or less of its called up share capital

42
Q

What must happen within a 21 days of any requirement to hold a meeting?

A

Directors must call a meeting to take place within 28 days

43
Q

When must a public company hold an annual general meeting?

A

During the 6 months following its accounting reference date

Failure to do so can lead to fines

44
Q

How much notice must be given for AGMs?

A

At least 21 days

Must also state that the meeting is an AGM

45
Q

When is a notice of resolution to be moved given to members?

A

Members represent 5% of total voting rights or at least 100 with shares of an average of more than £100 per member

46
Q

Are general meetings requires to pass a resolution?

A

Public - yes

Private - no, can be written or at general meeting

47
Q

What is a quorum?

A

Min number of people required to be at a general meeting

Generally 2

Single member companies allowed 1

48
Q

What records of meetings must companies keep for 10 years?

A

All resolutions passed

Minutes

Details of decisions by sole member companies

49
Q

What did the Hashmi v Lorimer case do?

A

Revealed that 2 directors are needed to hold a board meeting

Any decision made by sole director is invalid

50
Q

What’s the youngest age a director can be?

A

16

51
Q

Are directors agents of the members?

A

No

52
Q

Can a director exercise powers outside of the purpose for which they were conferred.

A

No

53
Q

If a director has a conflict of interest what should they do?

A

Disclose to the board

54
Q

After a director vacates office, do they cease to be subject to any statutory duties as a company director?

A

No

May still be subject to the duty to avoid conflicts of interest and not to accept benefits from third parties.

55
Q

Is a director held to a higher standard of care?

A

No

Director is also judged by reference to their own skill, knowledge and experience

56
Q

Relief under s.994 will not be granted unless there has been a breach of company law, true or false?

A

False

57
Q

In a private company, shareholders representing what minimum percentage of the nominal value of
shares with voting rights must agree to shorter notice than 14 days for a general meeting, in the
absence of any provision in the articles of association?

A

90%

58
Q

Can a public limited company can use the written resolution procedure provided its articles of
association expressly authorise it.

A

No, resolutions must be passed in a general meeting

59
Q

What is required to remove an auditor?

A

Passing of an ordinary resolution with 28 days special notice

60
Q

Does the duty to exercise independent judgement override any agreement or provision that restricts
discretion by a director.

A

No

A director is not in breach of this duty where they act in accordance with the company’s constitution
or with an agreement, entered into after due consideration, that restricts the future exercise of a
director’s discretion.

61
Q

Can members amend articles?

A

Yes, by approving a resolution containing the change

Law (13 decks)

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