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FLK1 BL > Company Decision Making > Flashcards

Company Decision Making Flashcards

1
Q

Who makes decisions on behalf of a company?

A

The company’s directors and shareholders make decisions on its behalf.

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2
Q

What is the role of directors in a company?

A

Directors are responsible for the day-to-day running of the company.

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3
Q

What is the role of shareholders in a company?

A

Shareholders provide the money for the business and are responsible for some decisions.

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4
Q

What are the two categories of decisions for shareholders?

A
  1. Decisions made solely by shareholders (e.g., changing articles of association). 2. Decisions requiring shareholder permission for directors to enter contracts with risks.
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5
Q

What is a special resolution?

A

A special resolution is a decision made by shareholders, such as changing the company’s name or articles of association.

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6
Q

What is a board resolution?

A

Decisions made collectively by directors during board meetings.

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7
Q

What is required for a board meeting to be valid?

A

Notice must be given, and a quorum must be present.

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8
Q

What is the notice requirement for board meetings?

A

Notice must be reasonable and include the time, date, and place of the meeting.

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9
Q

What is a quorum at board meetings?

A

A quorum requires at least two directors to be present during a board meeting.

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10
Q

What happens if a director has a personal interest in a decision?

A

The director may not count in the quorum or vote on that decision.

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11
Q

What is the voting process at board meetings?

A

Voting is done by a show of hands, with each director having one vote.

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12
Q

What is a unanimous decision in the context of directors?

A

Directors can pass a resolution in writing if all eligible directors vote unanimously.

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13
Q

What are the two types of shareholders’ resolutions?

A

Ordinary resolutions and special resolutions.

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14
Q

What is required for an ordinary resolution to pass?

A

Over half of the votes cast at a shareholders’ general meeting must be in favor.

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15
Q

What is required for a special resolution to pass?

A

75% or more of votes cast at a shareholders’ general meeting must be in favor.

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16
Q

What is a general meeting?

A

A meeting called by the board of directors to pass shareholders’ resolutions.

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17
Q

What must the notice of a general meeting include?

A

Time, date, place, nature of business, wording of special resolution, and proxy rights.

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18
Q

What is the notice period for a general meeting?

A

There must be 14 clear days between the notice being deemed received and the meeting.

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19
Q

How is notice deemed received if sent by post or email?

A

Notice is deemed received 48 hours after being posted or emailed.

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20
Q

When is the general meeting scheduled if notice is handed out on a Thursday?

A

The general meeting will be on a Friday.

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21
Q

How is notice deemed received when sent by post or email?

A

It is deemed received 48 hours after the notice was posted or emailed.

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22
Q

What is the minimum notice required for a general meeting?

A

The minimum notice required is 14 clear days.

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23
Q

What is the quorum for a company with only one shareholder?

A

The quorum is one.

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24
Q

How do shareholders vote at a general meeting?

A

Voting will be on a show of hands, and each shareholder has one vote.

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25
Q

Can shareholders with a personal interest vote at a general meeting?

A

Yes, they can generally count in the quorum or vote.

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26
Q

What are the two key resolutions where a shareholder’s vote is not counted?

A
  1. A resolution to buy back shares. 2. An ordinary resolution to ratify a director’s breach of duty.
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27
Q

What happens if a shareholder with a personal interest is also a director?

A

They can vote and count in the quorum at the general meeting unless the resolution is one of the two key resolutions.

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28
Q

What is a poll vote?

A

A poll vote is where shareholders vote based on one vote for each share they own.

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29
Q

Who can demand a poll vote?

A

The chair, directors, two or more persons with voting rights, or persons representing at least one tenth of total voting rights.

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30
Q

What is required for a special resolution to be passed?

A

75% or more of the votes cast must be in favour.

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31
Q

What is the requirement for a general meeting to be held on short notice?

A

A majority in number of shareholders who hold 90% or more of the voting shares must consent.

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32
Q

What is a written resolution?

A

A resolution passed by shareholders without holding a general meeting, permitted for private companies.

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33
Q

What must be included in a written resolution?

A

How to signify agreement and the deadline for returning the written resolution.

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34
Q

What is the lapse date for a written resolution?

A

The lapse date is generally 28 days from circulation of the written resolution.

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35
Q

When are written resolutions passed?

A

When the required majority of eligible members have signified agreement.

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36
Q

What percentage of paid-up capital is needed for shareholders to requisition a general meeting?

A

Shareholders representing at least 5% of paid-up capital must request it.

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37
Q

What percentage of paid-up capital is required for shareholders to request a general meeting?

A

At least 5% of such paid-up capital of the company that carries the right of voting at general meetings (s 303(2)(a)).

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38
Q

What must the request for a general meeting state?

A

The request must state the general nature of the business to be dealt with at the meeting (s 303(4)(a)).

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39
Q

How soon must directors call a general meeting after a shareholder request?

A

The directors must call it within 21 days of the request (s 304(1)(a)).

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40
Q

What is the minimum notice period for a general meeting?

A

The minimum period of full notice of a general meeting is 14 clear days.

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41
Q

What is the maximum notice period for a general meeting called in response to a shareholder request?

A

The notice period must be no more than 28 days (s 304(1)(b)).

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42
Q

What is the maximum time from a shareholder request to the general meeting?

A

The maximum period is seven weeks, as the board must call the meeting within 21 days and it must be held no later than 28 days from the notice.

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43
Q

What must companies file at Companies House?

A

Companies must notify the Registrar of Companies when certain decisions are made.

44
Q

What is the penalty for failing to comply with notification requirements in the CA 2006?

A

The penalty is a fine for the company and all of its officers.

45
Q

What forms must companies fill in to notify Companies House?

A

Companies must fill in forms provided by Companies House to notify the Registrar of Companies.

46
Q

What documents must companies keep up to date internally?

A

Companies must keep the register of members and register of directors up to date.

47
Q

How long must companies keep board minutes and general meeting minutes?

A

Companies must keep these records for ten years.

48
Q

What is the alternative for keeping statutory books?

A

Companies can elect to keep these records on the central register at Companies House.

49
Q

What are companies required to do regarding accounting records?

A

Every company must keep adequate accounting records (s 386(1) CA 2006).

50
Q

What is the directors’ responsibility regarding accounts?

A

It is the directors’ responsibility to ensure that accounts are produced for each financial year (s 394 CA 2006).

51
Q

What must the accounts provide?

A

The accounts must give a true and fair view of the state of affairs at the company as at the end of the financial year (s 393(1) and s 396(2) CA 2006).

52
Q

Who must prepare a directors’ report?

A

The directors of every company, apart from small companies, must prepare a directors’ report for each financial year (s 415 CA 2006).

53
Q

What defines a ‘small company’?

A

A small company has a balance sheet total of not more than £5.1 million, a turnover of not more than £10.2 million, and no more than 50 employees (s 382 CA 2006).

54
Q

What defines a ‘micro-entity’?

A

A micro-entity has a balance sheet total of not more than £316,000, a turnover of not more than £632,000, and no more than ten employees (s 384A CA 2006).

55
Q

What is the time limit for filing accounts for a private company?

A

The time limit is nine months from the end of the accounting reference period (s 442(2) CA 2006).

56
Q

What must every company file within 14 days of its confirmation date?

A

Every company must file a confirmation statement, on form CS01 (s 853A CA 2006).

57
Q

What are the company’s officers?

A

The company’s officers are the directors, company secretary, and auditor.

58
Q

Is a company secretary required for private companies?

A

Private companies are not required to have a company secretary (s 270(1) CA 2006).

59
Q

What is the role of a company secretary?

A

The company secretary deals with the company’s legal administrative requirements.

60
Q

How is the first company secretary appointed?

A

The first company secretary is often the person named on the IN01 form.

61
Q

How can a company secretary be removed from office?

A

The company secretary can resign or be removed by board resolution.

62
Q

What must a company do when a company secretary is appointed?

A

The company must notify the Registrar of Companies within 14 days of the appointment (s 276(1)(a) CA 2006).

63
Q

What is the auditor’s main duty?

A

The auditor’s main duty is to prepare a report on the company’s annual accounts (s 495(1) CA 2006).

64
Q

What must the auditor’s report state?

A

The auditor’s report must state whether the accounts have been prepared properly and give a true and fair view (s 495(3) CA 2006).

65
Q

Who appoints the auditor of a private company?

A

The directors usually appoint the company’s first auditor (s 485(3) CA 2006).

66
Q

Can shareholders remove the auditor?

A

Yes, shareholders can remove the auditor from office at any time by ordinary resolution (s 510 CA 2006).

67
Q

What constitutes misleading material in an auditor’s report?

A

Knowingly or recklessly including misleading, false, or deceptive material in the auditor’s report, or omitting required statements from the report as per CA 2006.

68
Q

How can shareholders remove an auditor?

A

Shareholders can remove the auditor from office at any time by ordinary resolution (s 510 CA 2006) and must give special notice to the company of the proposal (s 511 CA 2006).

69
Q

What is the auditor’s right to resign?

A

The auditor can resign at any time by notice in writing sent to the company’s registered office (s 516 CA 2006).

70
Q

What must an auditor do upon ceasing to hold office?

A

They must deliver a statement to the company explaining the circumstances connected with ceasing to hold office (s 519 CA 2006).

71
Q

Who becomes the first shareholders of a company?

A

The two people who sign the memorandum of association as subscribers automatically become the first shareholders and must be entered on the company’s register of members (s 112 CA 2006).

72
Q

How can a new shareholder obtain shares?

A

A new shareholder can obtain shares by buying from an existing shareholder, receiving shares as a gift, or through transmission when a shareholder dies or becomes bankrupt.

73
Q

What is required of companies regarding the register of members?

A

Every company must keep a register of members (s 113 CA 2006) or may keep the information on the central register at Companies House (s 128B).

74
Q

What rights do shareholders have regarding the register of members?

A

All shareholders have the right to have their name on the register of members (s 113 CA 2006) and must be registered as soon as practicable.

75
Q

What is the significance of share certificates?

A

All shareholders have the right to receive a share certificate, which is prima facie evidence of the holder’s title to the shares (s 768 CA 2006).

76
Q

What is the PSC register?

A

The PSC register discloses information about persons with significant control in private and non-traded public companies, enabling third parties to understand who holds power in the company.

77
Q

What forms must be completed for changes in the PSC register?

A

Form PSC01 for individuals appearing for the first time, Form PSC02 for relevant legal entities, Form PSC04/PSC05 for changes, and Form PSC07 for ceasing control.

78
Q

What rights do shareholders have under the company’s articles of association?

A

The company’s constitution is a statutory contract, allowing shareholders to take action for breaches, including voting rights and sharing in profits.

79
Q

What is a shareholders’ agreement?

A

A shareholders’ agreement binds the parties to it and provides remedies for breaches, unlike the articles of association which bind all shareholders.

80
Q

What are the primary voting rights of shareholders?

A

Shareholders can vote at general meetings, send proxies, requisition meetings, and circulate written resolutions if they hold certain percentages of shares.

81
Q

What are some other rights of shareholders?

A

Rights include receiving dividends, applying to wind up the company, removing directors or auditors, inspecting company documents, and receiving annual accounts.

82
Q

What is a corporate shareholder?

A

A corporate shareholder is a company that may authorize a person to act as its representative at company meetings (s 323 CA 2006).

83
Q

What defines a subsidiary company?

A

A company is a subsidiary if another company holds a majority of its voting rights or has the right to appoint/remove a majority of its directors (s 1159 CA 2006).

84
Q

What additional rights do shareholders in public companies have?

A

Shareholders in public companies have additional rights and responsibilities, particularly if the company is publicly traded.

85
Q

What is a single-member company?

A

A single-member company has only one shareholder, typically where one individual is both the sole director and shareholder.

86
Q

What happens if a company becomes insolvent?

A

The company will be wound up.

87
Q

What is a single-member company?

A

A single-member company has only one shareholder, typically where one individual is both the sole director and the sole shareholder.

88
Q

What must be stated on the register of members for a single-member company?

A

There must be a statement indicating that the company is a single-member company.

89
Q

What happens if the number of shareholders in a single-member company increases?

A

A statement must be made indicating that the company has ceased to have only one member, along with the date of that event.

90
Q

What is required when shares are held by joint shareholders?

A

The register of members must record both names but only one address.

91
Q

What are the different types of shares?

A

Different types of shares include ordinary, preference, redeemable, and deferred shares.

92
Q

What rights do ordinary shareholders have?

A

Ordinary shareholders generally have the right to attend and vote at general meetings and receive dividends if declared.

93
Q

What are ordinary A and B shares?

A

They are different categories of ordinary shares created to treat shareholders differently in certain circumstances.

94
Q

What are preference shares?

A

Preference shares provide enhanced rights over ordinary shares, often including a guaranteed right to a dividend.

95
Q

How is the dividend for preference shares typically expressed?

A

The dividend is usually expressed as a percentage of the nominal value of the preference share.

96
Q

What is cumulative preference share?

A

Cumulative preference shares require missed dividends from previous years to be paid before ordinary shareholders receive dividends.

97
Q

What is a non-cumulative preference share?

A

Non-cumulative preference shares do not carry the right to receive missed dividends from previous years.

98
Q

What are participating preference shares?

A

Participating preference shares allow shareholders to receive additional payments if ordinary shareholders receive dividends over a specified amount.

99
Q

What legal mechanisms protect minority shareholders?

A

Minority shareholders are protected by unfair prejudice actions and derivative claims.

100
Q

What can a shareholder do under Section 994 of the CA 2006?

A

A shareholder can apply to the court for a remedy if they feel unfairly prejudiced as a shareholder.

101
Q

What constitutes unfair prejudice?

A

Unfair prejudice occurs when the company’s affairs are conducted in a manner that is harmful to one or more shareholders and is deemed unfair.

102
Q

What is a derivative claim?

A

A derivative claim is a claim instigated by a shareholder for a wrong done to a company due to a director’s act or omission.

103
Q

What must a shareholder do before continuing a derivative claim?

A

The shareholder must apply to the court for permission to continue the claim.

104
Q

What does the court consider when allowing a derivative claim to continue?

A

The court considers whether the application and evidence disclose a prima facie case for continuing.

105
Q

What happens if the court grants permission for a derivative claim?

A

The court may give directions for evidence to be provided or adjourn the proceedings.

106
Q

Who bears the legal costs if permission to continue a derivative claim is refused?

A

The applicant shareholder bears the legal costs if permission is refused.

107
Q

Who bears the legal costs if permission to continue a derivative claim is granted?

A

The company bears all legal costs of the claim if permission is granted.

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