Company Decision-Making, Officers, and Shareholder Rights

Question 1

Who is responsible for the day-to-day running of a company?

Answer 1

The directors

Question 2

Who provides the money to allow a business to operate and are responsible for some of the decisions a company makes?

Answer 2

The shareholders

Question 3

What are the two main categories of decisions that shareholders make?

Answer 3

○ Decisions shareholders alone make (e.g., changing the articles of association or company name).
○ Decisions that give directors permission to enter certain contracts (e.g., buying property from a director).

Question 4

What is a board resolution?

Answer 4

A decision made by directors collectively in board meetings.

Question 5

What is the minimum number of directors required to be present at a board meeting for it to be valid?

Answer 5

A quorum of two directors

Question 6

What should a director do if they have a personal interest in a proposed transaction with the company?

Answer 6

They must declare the nature and extent of their interest to the board

Question 7

Can a director vote on a board resolution if they have a personal interest in the matter?

Answer 7

Generally no, they may not count in the quorum or vote if a proposed decision of the board is concerned with an actual or proposed transaction or arrangement with the company in which a director is interested. However, a company can disapply this rule.

Question 8

How are board resolutions usually passed?

Answer 8

By a simple majority, meaning over half of those present must vote in favor.

Question 9

Can directors make decisions without a board meeting?

Answer 9

Yes, through a unanimous decision expressed in writing or other method showing all eligible directors share a common view.

Question 10

What are the two types of shareholders’ resolutions?

Answer 10

Ordinary resolutions and special resolutions

Question 11

What majority is required to pass an ordinary resolution?

Answer 11

Over half of the votes cast.

Question 12

What majority is required to pass a special resolution?

Answer 12

75% or more of the votes cast.

Question 13

What are the two methods of passing shareholders’ resolutions?

Answer 13

In a general meeting or by written resolution.

Question 14

What is the minimum notice period for a general meeting?

Answer 14

14 clear days.

Question 15

What is a poll vote?

Answer 15

A vote where shareholders vote based on one vote for each share they own, not one vote per person.

Question 16

What is the procedure for holding a general meeting on short notice?

Answer 16

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

Question 17

What is the lapse date for a written resolution?

Answer 17

28 days from the circulation date of the resolution.

Question 18

What percentage of voting rights is required for shareholders to request the company to circulate a written resolution?

Answer 18

5% or more.

Question 19

What percentage of the paid-up capital of a company is needed for shareholders to request the directors to call a general meeting?

Answer 19

5% or more.

Question 20

What are the company’s officers?

Answer 20

The directors, company secretary, and auditor.

Question 21

Is a private company required to have a company secretary?

Answer 21

No.

Question 22

What is the main duty of the company’s auditor?

Answer 22

To prepare a report on the company’s annual accounts.

Question 23

How do the subscribers to the memorandum of association become shareholders?

Answer 23

They automatically become the first shareholders of the company.

Question 24

What is the register of members?

Answer 24

A register which every company must keep, containing the names of the company’s shareholders.

Question 25

What is a PSC register?

Answer 25

A register of persons with significant control in a company.

Question 26

What is the statutory contract between each shareholder and the company?

Answer 26

The company's constitution, mainly its articles of association.

Question 27

What is a shareholders' agreement?

Answer 27

An agreement that binds the shareholders who are party to the agreement, and that may include clauses to protect minority shareholders

Question 28

What are some of the rights that shareholders have related to voting?

Answer 28

○ Right to send a proxy. ○ Right to a poll vote. ○ Right to receive notice of meetings. ○ Right to requisition a meeting. ○ Right to apply to court to call a meeting

Question 29

What is a subsidiary company?

Answer 29

A company that is controlled by another company, its holding company.

Question 30

What is a wholly-owned subsidiary?

Answer 30

A company that has no members except its holding company and that company's wholly-owned subsidiaries, or persons acting on behalf of the holding company or its wholly-owned subsidiaries.

Question 31

What are the two main types of shares?

Answer 31

Ordinary shares and preference shares.

Question 32

What rights do ordinary shares generally give to shareholders?

Answer 32

The right to attend and vote at general meetings and to receive dividends.

Question 33

What is the primary advantage of a preference share?

Answer 33

Preference shareholders receive enhanced rights over and above ordinary shareholders, such as a guaranteed right to a dividend.

Question 34

What are some ways minority shareholders are protected?

Answer 34

Through unfair prejudice actions and derivative claims.

Question 35

What is an unfair prejudice action?

Answer 35

A shareholder can apply to the court for a remedy if the company's affairs have been conducted in a way that is unfairly prejudicial to their interests.

Question 36

What is a derivative claim?

Answer 36

A claim brought by a shareholder on behalf of the company for a wrong done to the company by a director.