Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

Law > Companies: ownership and management > Flashcards

Companies: ownership and management Flashcards

You may prefer our related Brainscape-certified flashcards:
MBE flashcards MPRE flashcards Civil Procedure 1L flashcards
1
Q

Types of director - De facto director

A

Anyone who acts as a director, although not validly appointed as one

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

Types of director - Shadow director

A

Someone ‘in accordance with whose directions or instructions the directors are accustomed to act’
(directors follow their directions)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

Types of director - Alternate director

A

A director may appoint an alternate director to attend and vote at board meetings when he is unable to

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

Types of director - Executive director

A

In charge with performing a specific role e.g finance director
- full time employee involved in management

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

Types of director - Non-executive director

A

Who does not have a particular function but generally just attend board meetings
- no salary, usually part time
- receive nominal fee
- exerts control over executive directors

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

Types of director - Managing director

A

Usually provide for the directors to appoint one or more of their number to be managing director, carrying out day-to-day functions

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

Types of director - Chairman

A
  • responsible for ensuring procedure in meetings is followed
  • usually a non-executive director
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

Types of director - De Jure director

A

A person who has been appointed following the correct legal procedure

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

Removal of a director

A
  • Death
  • By members
  • Disqualification
  • Resignation
  • Not standing for re-election
  • Required to do by article
  • Prohibition by law
  • Result of bankruptcy
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

what are the requirements for removal of a director?

A

ordinary resolution with special notice

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

Notice required of resolution to remove a director

A

28 days

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

Time period to notify Companies House of new directors

A

14 days

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

Resolution required to appoint a director

A

ordinary

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

Notice needed to remove a director

A

special

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

Director’s powers - Statutory (general)

A

The directors are statutorily bound to exercise powers only ‘for the purpose for which they are conferred’

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

Director’s powers - Statutory (specific)

A

For example alteration of the articles and reduction of capital need a special resolution, which the directors must secure from the shareholders in general meeting before they can act

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

Director’s powers - Restriction in Articles

A

For example the articles may set a maximum amount that the directors are entitled to borrow, any greater amount needing approval

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

Director’s powers - Members

A

The members can exercise control over the directors’ powers:

  • By passing special resolution to alter the articles
  • Removing directors
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

Directors’ authority - Express actual

A

The actions of a director with express authority will bind the company

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

Directors’ authority - Implied

A

Managing directors and to some extent other executive directors, are much more likely to bind the company by their actions.

A company secretary has limited authority to enter into contracts.

(third party assumes they are director)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

Directors’ authority - Ostensible

A

If the board permits a director to behave as if he were a managing director or give the impression that he is one, that director will have apparent or ostensible authority to enter a contract

22
Q

Directors’ duties - To act within powers

A
  • Must only do what they have authority to do
  • Must use powers for the purpose given
    If director act outside their powers the transaction will be invalid
23
Q

Directors’ duties - To promote the success of the company

A
  • Act in the best interest of the company
  • Consider long term and short term effects of decisions
  • Consider impacts on different stakeholders
24
Q

Directors’ duties - To exercise independent judgement

A
  • Ignore own personal interest and bias in any decision being taken
25
Q

Directors’ duties - To exercise reasonable skill and care

A
  • Objective test - the general knowledge skill and experience that could reasonable be expected of a director
  • Subjective test - the actual knowledge, skills and experience held by the director
26
Q

Directors’ duties - To avoid a conflict of interest

A

should avoid placing self in situations where own interest could conflict with those of the company

27
Q

Directors’ duties - Not to accept benefits from third parties

A

should not accept benefits that may interfere with exercise of independent judgement

28
Q

Directors’ duties - To declare an interest in proposed transaction

A
  • should disclose to the board
  • before the transaction is entered into
29
Q

Wrongful trading

A

no reasonable prospect that company could avoid insolvent liquidation
- directors and shadow directors are liable

30
Q

Wrongful trading - Consequences

A
  • contribute to company assets
  • upto 15 years disqualification
31
Q

Fraudulent trading

A

business is carried on with intent to defraud
- any person knowingly to carry on the business is liable

32
Q

consequences of fraudulent trading

A
  • Civil action (contribution to assets, disqualification)
  • Criminal Prosecution (prison,fine)
33
Q

what is a shareholders agreement?

A

Contractual agreement setting out the members’ rights and duties
- private document and doesnt have to be filed with registrar

34
Q

members rights

A
  • to be sent a copy of annual accounts and reports
  • to require the directors to call a general meeting
  • to appoint a proxy to exercise their rights
    If a company refuses to respect the member’s rights, they can take legal action to enforce them
35
Q

Approval of directors’ actions - Service contracts

A

Approval is required if the contract guaranteed for a director is more than 2 years by members

36
Q

Approval of directors’ actions -Substantial property transactions

A

If a director buys from, or sells to, the company an asset of a substantial value, the transaction must be approved by the members. If not, the transaction is voidable by the company and the director in question may have to repay to the company any gain he has made or any loss the company has suffered.

A substantial value is either:

  • more than £100,000, OR
  • more than £5,000 AND more than 10% of the company’s assets.
37
Q

Approval of directors’ actions - Loans to directors

A

If the company plans to make a loan to a director, or give a guarantee for a loan to a third party on behalf of a director, they must first provide a document to the members setting out the details and gain those members’ approval.

Failure to do so allows the company to treat the transaction as voidable and also can mean the director in question must repay the company any gain he has made or any loss the company has suffered.

Similar rules apply for loans made to someone connected to a director.

38
Q

Approval of directors’ actions - Loans to directors
EXEPTIONS

A
  • the loan is to be used to meet expenses incurred on company business or defending the company in legal / regulatory actions
  • the loan is for a minor amount
  • the loan is made between two group companies
  • the company’s usual business is lending money and the loan was made on comparable terms to those it would be made to a member of the public.
39
Q

Approval of directors’ actions - Payments for loss of office

A

Any ex-gratia (i.e. not in the director’s contract) payments made to a director on loss of office / retirement should be approved by the members. To allow them to do this, they should be provided with a memorandum setting out the details of the payment.

If approval is not given, the payment is treated as if it were on trust for the company, and the company can claim it back.

The director who authorised the payment can also be made to repay the company for any losses it has suffered.

40
Q

Minority protection - Variation of class rights

A

Holders of more than 15% of a class of shares to the court for cancellation a variation of rights

41
Q

Minority Protection - Company meeting

A
  • Can force the inclusion of a resolution on the agenda of the AGM
  • Can require directors to call a GM
42
Q

Minority protection - Notice of members’ resolutions

A

Must be given by the company if required to do so by members holding more than 5% of voting rights.

43
Q

Minority protection - Redeeming or purchasing shares by payment from capital

A

Any member or creditor can apply to the court to prohibit the transaction

44
Q

what is a proxy

A

can attend meetings, vot and speak on behalf of member for whom he or she is acting

45
Q

what is a quorum

A

minimum number of member that need to be present at a meeting to validate business

46
Q

percival vs wright

A

directors owe no general duty to individual members

47
Q

problem with quorum (show of hands)

A

members may not get total voting rights therefore members with 10% more rights can call for a poll

48
Q

rules for single member companies

A
  • can conduct business without need for notice or minutes
  • must have full written record of any decision taken in general meeting and must be retain for 10 years
49
Q

what requires a special resolution

A
  • alteration of articles
  • reduction in capital
50
Q

name three matters that concern directors but require approval of the members in a general meeting and state the consequences of breach

A
  • Service contract - provision is void and provision for termination
  • Substantial property transactions - contract is voidable and director liable for any gain
  • Loan to directors - contract is voidable and director liable for any gain
  • Payment for loss of office - payment is held on trust for the company, director liable to indemnify for any loss
51
Q

under what two circumstances is a public company required to call a general meeting?

A
  • An AGM every year
  • wherever it net assets are half or less of its called up share capital
52
Q

three instances where a written resolution cannot be used:

A
  • in a public company
  • to remove an auditor
  • to remove a director

Law (13 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions