Company Decision-making, Company's Officers and Shareholders

Question 1

Which decisions can shareholders alone make?

Answer 1

1. Changing the articles of association
2. Changing the name of the company

Question 2

Once the shareholders have made the decision to change articles of association / company name, can the directors reverse the decision?

Answer 2

No and they must ensure that the correct paperwork is completed and Companies House is notified

Question 3

Which decisions can the shareholders give the directors permission to make?

Answer 3

1. Entering into certain types of contracts which carry particular risks for the company
2. Where the directors could potentially use their position to benefit personally from the contract

Question 4

How do directors make decisions?

Answer 4

Board meetings and any decisions made are board resolutions

Question 5

How do directors give notice of board meetings and what is required?

Answer 5

1. Notice must be reasonable
2. It does not need to be in writing
3. It needs to include time, date and place
4. If it is to be held separately (eg teams) then this needs to be communicated

Question 6

What is the quorum of a board meeting?

Answer 6

Two directors must be present at all times

Question 6

If a director has a personal interest in a proposed transaction or arrangement, what must they declare?

Answer 6

The nature and extent of this interest to the board

Question 6

When can a director not count in the quorum of two?

Answer 6

1. If the director is concerned with an actual or proposed transaction or arrangement with the company
2. in which the director is interested

Question 7

When does a director NOT need to declare their interest in a proposed transaction or arrangement with the company?

Answer 7

1. If it cannot be reasonable regarded as likely to give rise to a conflict of interest
2. If, or to the extent that the other directors are already aware of it
3. If, or to the extent that it concerns terms of a service contract that have been or are to be considered by a meeting of the directors

Question 8

Can a company disapply the rule of a director not counting in the quorum due to a personal interest?

Answer 8

Yes

Question 9

How is voting carried out in a board meeting?

Answer 9

1. Simple majority
2. By a show of hands
3. Each director has one vote
4. If the board has appointed a director to act as chair, they will have one extra vote in the event of a tie (only used in the event that the casting vote is to be used in favour)

Question 10

Do directors HAVE to call board meetings?

Answer 10

No, a board resolution can be passed in the form of writing or other method if all directors have indicated that it is a unanimous decision

Question 11

How many shareholders need to vote for an ordinary resolution to pass?

Answer 11

Over half of the votes cast at a shareholders general meeting

Question 12

How many shareholders need to vote for a special resolution to pass?

Answer 12

75% or more of votes cast at a shareholders general meeting

Question 13

How is a shareholders general meeting called?

Answer 13

Board of directors pass a board resolution

Question 14

How often to public and private companies have to hold a general meeting?

Answer 14

1. Public companies: at least one a year
2. Private companies: no rule

Question 15

How must notice be given for a general meeting?

Answer 15

1. Notice must be given to every shareholder and director
2. Notice must be given to the auditor (if there is one)
3. It must be given a hard or electronic copy

Question 16

What must the notice include for a general meeting?

Answer 16

1. Time, date and place
2. General nature of the business to be dealt with
3. If they are discussing a special resolution, the exact wording of it
4. Each shareholder’s right to appoint a proxy to attend on their behalf

Question 17

What is the notice period for a general meeting?

Answer 17

14 clear days but remember that if it is sent by post or email then it is deemed received 48 hours after the notice was sent

Question 18

What is the quorum of a general meeting?

Answer 18

Two but one is fine if there is only one shareholder

Question 19

How is voting carried out at a general meeting?

Answer 19

Show of hands and each shareholder has one vote

Question 20

Are shareholders allowed to count in the quorum if they have a personal interest?

Answer 20

Usually, yes as they own the company and their interests are seen as being the same as the company’s interest

Question 21

What are the exceptions where the person interest of a shareholder means their votes are not counted?

Answer 21

1. A resolution to buy back some or all of the shareholder’s shares
2. An ordinary resolution to ratify a director’s breach of duty

Question 22

What is a poll vote?

Answer 22

Where the shareholder’s vote in a general meeting on the basis of one vote for each share they own rather than one vote per person

Question 23

Who can demand a poll vote?

Answer 23

1. The chair of the meeting 2. The directors 3. Two or more persons having the right to vote on the resolution 4. A person/persons representing not less than one tenth of the total voting rights of all the shareholders having the right to vote on the resolution

Question 24

When can a poll vote be demanded?

Answer 24

Before or during the general meeting before voting takes place, or after the shareholders have showed a show of hands

Question 25

How can a general meeting be validly held on short notice?

Answer 25

1. A majority in number of the company's shareholders 2. Who between them hold 90% or more of the company's voting shares must consent 3. This percentage is increased to 95% for public companies

Question 26

Which information needs to be included on a written resolution?

Answer 26

1. How to signify agreement 2. The deadline for returning the written resolution (aka the lapse date)

Question 27

What is the lapse date for a written resolution?

Answer 27

28 days unless the Articles state differently

Question 28

How do you calculate the lapse date for a written resolution?

Answer 28

28th day following circulation of the written resolution (assumed midnight)

Question 29

When are written resolutions passed?

Answer 29

When the required majority of eligible members have signified agreement to the resolution

Question 30

How many votes does a shareholder have for a written resolution?

Answer 30

One vote for each share that they own

Question 31

For a written resolution, how many votes are needed to pass?

Answer 31

1. Ordinary: over half of the votes 2. Special: 75% or more

Question 32

What % of voting rights must a shareholder have to circulate a written resolution?

Answer 32

5% or more but the company's articles can reduce this (but cannot exceed)

Question 33

If the shareholders call a general meeting, how many days do the director's have to call it?

Answer 33

21 days to call the meeting and the meeting must be held within 28 days

Question 34

What is meant by a small company?

Answer 34

A balance sheet with a total of not more than £5.1 million, a turnover of not more than £10.2 million and no more than 50 employees per financial year

Question 35

How long do companies have to file their accounts with companies house?

Answer 35

1. 9 months from the end of the accounting reference period for a private company 2. 6 months for a public company

Question 36

What makes a company a subsidiary company?

Answer 36

1. The other company holds a majority of voting rights 2. It is a member of it and has the right to appoint/remove a majority of its board of directors 3. It is a member of it and alone controls a majority of the voting rights in it

Question 37

What are ordinary shares?

Answer 37

Give the shareholders the right to attend and vote at general meetings

Question 38

What are preference shares?

Answer 38

Preference shareholders receive enhanced rights of some sort