Companies - Directors and Officers

Question 1

At least how many directors must a private company and a public company have?

Answer 1

1. Private - 1
2. Public - 2

Question 2

At least how many shareholders must a private company have?

Answer 2

At least 1

Question 3

Under the Model Articles, which two group of people can appoint new directors?

Answer 3

1. Directors
2. Shareholders (through an ordinary resolution)

Question 4

Within how many days must a company notify the Registrar of Companies of new director appointments and changes to their details?

Answer 4

14 days

Question 5

What is a de facto director?

Answer 5

A director who acts and claims to be a director, but does not have the official appointment

Question 6

What is a shadow director?

Answer 6

Someone who influences other directors, but doesn’t claim to be one or has been appointed as one

Question 7

What are executive directors responsible for?

Answer 7

The day-to-day running of a company

Question 8

What are the role of non-executive directors?

Answer 8

Supervisory - oversees the activity of the EDs. They’re usually consultants

Question 9

What is a nominee director?

Answer 9

One appointed to the board to represent the interests of a particular stakeholder (e.g. shareholder)

Question 10

How does an individual director gain express actual authority to bind the company?

Answer 10

By board resolution

Question 11

How may an individual director gain implied actual authority to bind the company?

Answer 11

By allowing a director to carry out a certain act or hold himself as a director with authority

Question 12

When will apparent authority for a director arise?

Answer 12

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)

Question 13

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?

Answer 13

Yes - but the director may be liable for any loss incurred and the company can seek an indemnity from the director

Question 14

What are two ways that companies can execute documents?

Answer 14

1. Affixing their seal
2. Signature of 2 directors, Director and secretary, or a single director in presence of a witness

Question 15

What is the concept of enlightened shareholder value?

Answer 15

Directors of a company have a fundamental duty to promote its long term success for the benefits of the members as a whole

Question 16

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?

Answer 16

The creditors

Question 17

Directors have a duty to exercise the _____ of the care, skill, and diligence that would be exercised by a reasonable diligent person with:

1. The ________ knowledge, skill, and experience that ________ may be expected of a person carrying out the duties of a director (an ________ test); or
2. The ___________ knowledge, skill and experience the director in question ________ ____ (a __________ test)

Answer 17

higher, general, reasonably, objective, general, actually has, subjective

Question 18

To avoid conflicts of interest, a director has a duty to _____ their interest in proposed or existing _________

Answer 18

disclose, transactions

Question 19

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

Answer 19

personal interest, quorum

This is under the Model Articles. Amended Articles may permit this.

Question 20

Name 4 other director duties

Answer 20

1. Act within powers of the Company’s constitution and exercise the powers for the purposes for which they were conferred
2. Exercise independent judgment
3. Avoid conflicts of interest
4. Not benefit from third parties

Question 21

Under the Model Articles (unamended), any director may call a meeting of the directors by giving _________ ______ of the meeting

Answer 21

reasonable notice

Question 22

Under the Model Articles (unamended), what is the quorum requirement for a directors meeting?

Answer 22

2 directors

Question 23

Shareholders can remove directors by a _______ ______ vote

Answer 23

Simple majority (aka ordinary resolution)

Question 24

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

Answer 24

articles, employment, damages

Question 25

What is a Bushell v Faith clause?

Answer 25

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

Question 26

If removal of a director would violate the director’s service contract, would the company be liable in contract for breach?

Answer 26

Yes

Question 27

How many days before the meeting must notice to adopt an ordinary resolution to remove a director be given?

Answer 27

28 days

Question 28

What are 4 headings under which a director may be disqualified?

Answer 28

1. Conviction of an indictable offence
2. Persistent breaches of company legislation
3. Fraud
4. Summary conviction of an offence/in contravention of failure to comply with company legislation (e.g. failure to deliver accounts and reports)

Question 29

Which type of companies must have a company secretary?

Answer 29

Public companies

Question 30

What are four statutory criteria for qualification as a company secretary?

Answer 30

1. Being secretary for at least 3 years; or
2. Member of regulated accounting/secretarial body; or
3. Barrister or solicitor; or
4. capable of discharging the functions of secretary of the company

Question 31

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.

Answer 31

apparent, administrative

Question 32

What is the definition of a large company?

Answer 32

A company with:

1. More than 50 employees; or
2. Annual turnover of over £10 million

Question 33

Large companies must hire who to prepare the company accounts?

Answer 33

Auditor