Company decision-making, officers, and shareholders

Question 1

Can directors delegate their powers?

Answer 1

Yes, as they see fit (Model Articles)

Question 2

How to give notice for directors’ meeting

Answer 2

It must be reasonable, include time, date, and place
Doesn’t have to be in writing

Question 3

Minimum quorum for directors’ meeting

Answer 3

2

Question 4

Director not counted in quorum for directors’ meeting if:

Answer 4

The decision is concerned with an actual/proposed transaction with the company in which the director is interested

Question 5

Directors must declare personal interest in proposed transactions with the company, except if:

Answer 5

1. it cannot be reasonably regarded as likely to create conflict,
2. directors are/should already be aware of it,
3. it concerns a service contract

Question 6

Majority needed to pass directors’ resolution

Answer 6

Simple majority (chair has casting vote)

If it’s a written resolution: must be UNANIMOUS

Question 7

Notice requirements for GM

Answer 7

• directors must notify every shareholder + director + auditor
• give hard copy/electronic/via website

Question 8

What a notice of GM must include

Answer 8

• time + date + place,
• general nature of meeting’s business
• exact wording of any special resolution proposal,
• right for shareholder to appoint proxy to vote on his behalf

Question 9

Notice period for GM

Answer 9

14 clear days after deemed to be received

Question 10

When is a notice of GM deemed to be received?

Answer 10

If handed over: that day
If sent by post/email: first business day after 48 hours after sending

Question 11

Quorum for shareholders’ meeting

Answer 11

2 (unless only 1 shareholder in total)

Question 12

How is voting done at GM?

Answer 12

Default: show of hands
BUT: can demand poll voting (1 share = 1 vote):
- chair,
- directors,
- 2/more people with right to vote,
- anyone with 10% or more of voting rights

Question 13

Written resolutions lapse time

Answer 13

28 days from circulation (day of circulation = day 1)

Question 14

How is a written resolution passed?

Answer 14

By signatures of majority of shareholders

1 vote = 1 share

Question 15

Who can demand GM/written resolution circulation?

Answer 15

Shareholder with 5% of voting rights or more

Must be circulated/called within 21 days

Question 16

When can a GM be held on short notice?

Answer 16

If majority of shareholders consent + they combined hold 90% or more of voting shares (95% in public company)

Question 17

Annual responsibilities of companies

Answer 17

• accounts for each financial year
• directors’ reports (except small companies),
• file confirmation statement within 14 days of incorporation anniversary

File all 3 at Companies House

Question 18

When must new shareholders be registered on the register of members?

Answer 18

As soon as practicable, but max. 2 months after acquires shares

Question 19

What is a share certificate + when must be issues?

Answer 19

Prima facie proof of title to shares
Must be issues within 2 months of acquiring shares

Question 20

Who is a person with significant control?

Answer 20

Shareholder with more than 25% of shares, or 25% of voting rights

Question 21

Who is a company’s constitution a contract between?

Answer 21

Company + shareholder, and shareholder + shareholder

Question 22

When do shareholders have a right to dividends?

Answer 22

• if profits available,
• directors recommend an amount, and
• shareholders approve it

Question 23

What are preference shares?

Answer 23

Generally forego voting rights in return for more profits (eg. guaranteed right to dividend)

Question 24

When + who can apply for a s.994 unfair prejudice claim?

Answer 24

A shareholder, if the company’s affairs are conducted in a manner unfairly prejudicial to all/some shareholders, or a proposed act/omission would be so prejudicial

Question 25

Court’s remedy for s.994 unfair prejudice claim

Answer 25

Remedy as sees fit- usually a share buyout

Question 26

When + who can apply for derivative claim?

Answer 26

A shareholder, for a wrong done to the company arising from an act/omission of a director

Question 27

Court must refuse permission for derivative claim if:

Answer 27

1. person acting to promote success of company wouldn’t bring the claim,
2. case arises from act/omission authorised by board,
3. case arises from act/omission ratified by board

Question 28

Factors to consider in permission for derivative claim:

Answer 28

• if shareholder acting in good faith,
• importance someone promoting success of company would attach to claim,
• whether authorisation/ratification likely,
• whether board decided not to continue claim,
• whether shareholder has claim he could pursue in own right

Question 29

Who is liable for costs if permission for derivative claim not granted?

Answer 29

The shareholder (if granted, company meets all costs)

Question 30

Definition of substantial property transaction

Answer 30

When a director/someone connected to him buys from/sells to the company a non-cash asset of substantial value

Question 31

“Connected person” is…

Answer 31

• member of director’s family, or
• company in which director/connected person:
  owns 20% or more of shares, or is entitled to exercise over 20% of voting power at any GM

Question 32

“Substantial value” is…

Answer 32

Anything over 100,000, or over 5,000 AND over 10% of company’s net asset value

Question 33

How to approve a substantial property transaction?

Answer 33

Ordinary resolution

If not, transaction is voidable!

Question 34

Who may have to account for profits from unauthorised substantial property transaction?

Answer 34

• any director with whom transaction entered,
• any person connected to the director with whom transaction entered + director to whom person connected,
• any other director who authorised the transaction

Question 35

Which decisions are taken by shareholders alone?

Answer 35

1. Change of Articles
2. Change of registered name