Company Decision-making

Question 1

What are the 2 decisions that shareholders make?

Answer 1

Decisions which the shareholders ALONE make (changing articles of association, the name of the company)

Decisions which give the directors PERMISSIOn to enter into certain contracts. (Buying property from director, etc)

Question 2

What is MA 9?

Answer 2

When a director calls a board meeting, they must give notice to the other directors

Question 3

What are the requirements for notice of board meetings?

Answer 3

Notice must be reasonable, which is dependent on the facts.

No need for notice to be in writing, but it must include the time, date, and place of meeting.

Question 4

What is rule MA 11

Answer 4

A quorum of 2 directors must be present at all times during a board meeting

Question 5

Why must there be a quorum of 2 people at a board meeting?

Answer 5

To reduce risk of one director turning up and making rash or fraudulent decisions without another director present.

Question 6

What is Rule MA 14?

Answer 6

A director may NOT count int eh quorum or vote if a proposed decision of the board is:

• concerned with an action or proposed transaction or arrangement
• in which a director is interested

Question 7

What is s 177 CA 2006?

Answer 7

Where a director has a personal interest in a proposed transaction or arrangement with the company, they MUST DECLARE the nature and extent of this interest to the board

Question 8

What are the exceptions of s 177?

Answer 8

177(6):

A director does not need to declare their interest in a proposed transaction or arrangement with the company:

If it cannot reasonably be regraded as likely to give rise
The other directors are already aware of it, or,
It concerns terms of a service contract that have been, or are to be, considered by a meeting of the directors.

Question 9

What is Rule MA 7?

Answer 9

Board resolutions are passed by a simple majority, which means that OVER HALF of those present must vote in favour in order for the board resolution to be passed

Question 10

How is voting at a board meeting carried out?

Answer 10

By a show of hands, and each director has 1 vote.

Question 11

What is MA 8?

Answer 11

It is possible to pass a board meeting in the form of a resolution in writing or any other method which shows that all eligible directors have indicated their view.

Question 12

What is s 282 CA 2006?

Answer 12

For an ordinary resolution to be passed in a general meeting, over half of the votes cast at the shareholder general meeting must be in favour

Question 13

What is rule 283 CA 2006?

Answer 13

For a special resolution to be passed, 75% or more of votes cast at a shareholders general meeting must be in favour of the resolution

Question 14

What are the 2 ways in whcih a shareholders resolution can be passed?

Answer 14

General meeting

Written resolution

Question 15

How is a general meeting used to pass a shareholders resolution?

Answer 15

They are called by the board of directors when passing a board resolution.

If they want the shareholders to pass a shareholder resolution.

OR< shareholders can request.

Question 16

What is the content of the NOTICE of a general meeting?

Answer 16

Directors must give notice to every shareholder and every director, and to the auditor if there is one

Notice must set out:
- time, date, place
- general nature of business
- If special resolution - exact words
- each shareholders right to appoint a proxy

Question 17

What is rule 307 and 360 CA?

Answer 17

The minimum notice requirement for a general meeting is 14 CLEAR DAYS

Question 18

What is s 318 CA?

Answer 18

The quorum of a general meeting is generally 2

Unless only one shareholder - then it is one

Question 19

When are shareholders votes NOT interested if they have an interest?

Answer 19

If it is for a reoslution to buy back some or all of a shareholder shares.

Ratification of the directors duty - if said person is the director in question.

Question 20

What are poll votes?

Answer 20

Where the shareholders vote in a general meeting on the basis of 1 vote for each share they own, instead of one vote per person.

Question 21

Who can a poll vote be demanded?

Answer 21

Chair of meeting
Directors
2 or more persons having the right to vote on the resolution
A person or persons, resenting not less than 10% of the total voting rights of all shareholders.

Question 22

When can a poll vote be used?

Answer 22

Can be demanded before a general meeting, during, or after the show of hands.

Question 23

What is Rule s 307(5)-(6)

Answer 23

General meeting can be validly held on short notice if:

• a majority in number of the company’s shareholders
• who between them, hold 90% or more of the companys Voting shares must consent

Question 24

What are written resolutions?

Answer 24

Pass a resolution by way of written resolution, for shareholder decisions.

Alternative of a general meeting. Board will hand out, post or email a written reoslution.

Question 25

What is set out in the written resolution?

Answer 25

Will set out the text of the ordinary and or special resolutions which the board is proposing, and teh shareholder has to sign and return it IF THEY WANT TO VOTE IN FAVOUR

Question 26

What is s 291(2) CA

Answer 26

A written reoslution must be circulated to every eligible member. Eligible means the shareholders who are entitled to vote on the resolution as at the circulation date of the resolution

Question 27

What information must be included on the written resolution? S 291(4)

Answer 27

How to signify agreement The deadline for returning it (lapse date)

Question 28

What is the lapse date for written resolutions (unless stated otherwise)

Answer 28

28 days from circulation

Question 29

What is rule s 296 CA

Answer 29

Written resolutions are passed when the required majority of eligible members have signified agreement to the resolution

Question 30

What is s 281(3) of CA?

Answer 30

If a section states that a resolution of members is required, but does not state which type, then it is ordinary resolution. UNLESS the company’s articles require a higher majority

Question 31

What is rule s 292 CA?

Answer 31

A shareholder or shareholders, who have 5% or MORE of the voting rights in the company, are entitled to require the company to circulate a written resolution.

Question 32

How long after shareholders exercise their right, must directors call a written resolution?

Answer 32

21 days after the request.

Question 33

What are post-decision requirements needed for companies?

Answer 33

Filing at companies house, if it is special resolution. Internal administration

Question 34

What are companies annual responsibilities?

Answer 34

They must keep adequate accounting records. Must ensure accounts are produced for each financial year - a true and fair view of the state of affairs at the company at the end of the financial year Directors must prepare a directors report for each financial year to accompany accounts. Must file accounts for each financial year at companies house Must file a confirmation statement, CS01 within 14 days from companys confirmation date.

Question 35

Which companies do NOT have to prepare a directors report?

Answer 35

Private companies classed as small company or micro-entity.

Question 36

What is a small company or a micro-entity?

Answer 36

Small means balance sheet total of not more than 5.1 million, or a turnover of not more than 10.2 million, and no more than 50 employees. Microentity means a company with a balance sheet total of not more than 316,000, a turnover not more than 632,000, and no more than 10 employees.

Question 37

What is the form CS01, and when must it be filed?

Answer 37

Confirmation statement, within 14 days from the companys confirmation date, the anniversary of its incorporation. Makes sure that the information is correct and up-to-date (on directors, shareholders, PSC etc)

Question 38

What are company secretary’s?

Answer 38

Deal with legislative administrative requirements. Officer of the company. Have apparent authority to enter into contracts of administrative nature.

Question 39

How can a company secretary be removed from office?

Answer 39

Can resign, or director can remove by board resolution .if written contract, may show removal from office.

Question 40

What forms are needed if a company secretary is introduced to office?

Answer 40

AP03 within 14 days of appointment.

Question 41

Which form is needed for the removal of a company secretary?

Answer 41

TM02 within 14 days of resignation or removal

Question 42

What is a company auditor?

Answer 42

Accountant, main duty is to prepare a report on the company’s annual accounts - to be sent to shareholders.

Question 43

How is an auditor appointed?

Answer 43

Directors of a private company appoint the companys first auditor, and after that the shareholders have the power to appoint the auditor, by ordinary resolution.

Question 44

What is the liability for auditors?

Answer 44

Do not owe a duty of care to the shareholders or new shareholders. Can be sued by negligence by company. Knowingly or recklessly including misleading, false or deceptive material in the auditors report.

Question 45

How do you remove an auditor?

Answer 45

Any time by ordinary reoslution. Shareholder must give special notice to the company of the proposal to remove the auditor.

Question 46

What form is needed to tell companies house that a director has retired?

Answer 46

TM01 Within 14 days