Companies - Directors and Officers Flashcards
At least how many directors must a private company and a public company have?
- Private - 1
- Public - 2
At least how many shareholders must a private company have?
At least 1
Under the Model Articles, which two group of people can appoint new directors?
- Directors
- Shareholders (through an ordinary resolution)
Within how many days must a company notify the Registrar of Companies of new director appointments and changes to their details?
14 days
What is a de facto director?
A director who acts and claims to be a director, but does not have the official appointment
What is a shadow director?
Someone who influences other directors, but doesn’t claim to be one or has been appointed as one
What are executive directors responsible for?
The day-to-day running of a company
What are the role of non-executive directors?
Supervisory - oversees the activity of the EDs. They’re usually consultants
What is a nominee director?
One appointed to the board to represent the interests of a particular stakeholder (e.g. shareholder)
How does an individual director gain express actual authority to bind the company?
By board resolution
How may an individual director gain implied actual authority to bind the company?
By allowing a director to carry out a certain act or hold himself as a director with authority
When will apparent authority for a director arise?
When the act of any partner carries on in the usual way business of the kind carried out by the firm (e.g. through past dealings)
When a director acts ultra vires in terms of authority when entering into a contract, is the company still liable for performance of the contract?
Yes - but the director may be liable for any loss incurred and the company can seek an indemnity from the director
What are two ways that companies can execute documents?
- Affixing their seal
- Signature of 2 directors, Director and secretary, or a single director in presence of a witness
What is the concept of enlightened shareholder value?
Directors of a company have a fundamental duty to promote its long term success for the benefits of the members as a whole
If a company is on the brink of insolvency, who must the directors consider or act in the interests of in displacement of the shareholders?
The creditors
Directors have a duty to exercise the _____ of the care, skill, and diligence that would be exercised by a reasonable diligent person with:
- The ________ knowledge, skill, and experience that ________ may be expected of a person carrying out the duties of a director (an ________ test); or
- The ___________ knowledge, skill and experience the director in question ________ ____ (a __________ test)
higher, general, reasonably, objective, general, actually has, subjective
To avoid conflicts of interest, a director has a duty to _____ their interest in proposed or existing _________
disclose, transactions
If a director has a _________ ______ in a transaction, the director cannot be counted as forming part of the ______ needed for the directors to vote on the transaction
personal interest, quorum
This is under the Model Articles. Amended Articles may permit this.
Name 4 other director duties
- Act within powers of the Company’s constitution and exercise the powers for the purposes for which they were conferred
- Exercise independent judgment
- Avoid conflicts of interest
- Not benefit from third parties
Under the Model Articles (unamended), any director may call a meeting of the directors by giving _________ ______ of the meeting
reasonable notice
Under the Model Articles (unamended), what is the quorum requirement for a directors meeting?
2 directors
Shareholders can remove directors by a _______ ______ vote
Simple majority (aka ordinary resolution)
Directors can be dismissed via an ordinary resolution despite the terms of the ______ or any ________ contract
However dismissal in these circumstances is subject to the payment of _______ for breach of contract
articles, employment, damages
What is a Bushell v Faith clause?
A clause which gives weighted voting to a director who is also a shareholder. If a vote has been called to remove them as a director, they may be able to protect themselves due to the increased voting rights
If removal of a director would violate the director’s service contract, would the company be liable in contract for breach?
Yes
How many days before the meeting must notice to adopt an ordinary resolution to remove a director be given?
28 days
What are 4 headings under which a director may be disqualified?
- Conviction of an indictable offence
- Persistent breaches of company legislation
- Fraud
- Summary conviction of an offence/in contravention of failure to comply with company legislation (e.g. failure to deliver accounts and reports)
Which type of companies must have a company secretary?
Public companies
What are four statutory criteria for qualification as a company secretary?
- Being secretary for at least 3 years; or
- Member of regulated accounting/secretarial body; or
- Barrister or solicitor; or
- capable of discharging the functions of secretary of the company
The company secretary’s powers are usually expressly delegated by the board of directors, but their authority can also be _______ (or ostensible). This means that the company can be bound by the acts of a company secretary even if they were not authorised by the board, if the contracts the company secretary entered into were of an ___________ nature, that is, of the type that a third party could reasonably assume would be within the powers of the company secretary.
apparent, administrative
What is the definition of a large company?
A company with:
- More than 50 employees; or
- Annual turnover of over £10 million
Large companies must hire who to prepare the company accounts?
Auditor
