company law : personnel Flashcards
what act is used to govern personnel in companies?
companies act 2006
what are the two types of personnel in a limited company?
- secretary
- director
what is a company director?
a legal personality (human 16yrs+ / corporation) who directs a company. can be a shareholder or director of another company. subject to company’s articles of association and companies house disqualification.
how does a director get appointed?
at start, named in initial application to companies house. later, ordinary resolution (private) or AGM (plc) used to add or replace directors
what is the minimum amount of directors required for a private limited company?
1
what is the minimum amount of directors required for a plc?
2
what are the four methods of removing a director?
4Rs
Retire
Resign
Rotation (contract finishes)
Removal (through voting system)
what do directors do?
take decisions at board meetings and on day-to-day basis. job role ultimately determined by articles of association which can limit their power
what are the two types of directors?
executive (paid employee)
non-executive (NOT paid, may get fee)
what is an executive director?
paid employee who is the one who does the work. eg. HR director, finance director
what is a non-executive director?
director who doesn’t get paid a salary and is often employed due to status (prestige purposes), contacts or expertise. they keep an eye on the EDs.
what is overboarding & why is it bad?
it is when too many NED roles are taken on by an individual in different companies which can then hinder their performance and stop them from performing properly.
how can we determine what type of director an individual is?
don’t look at the name, look at the activities - they may have the same responsibilities as a director but not the name
what is a proxy director?
a temporary “stand-in” director
what is a nominee in terms of directors?
has the role and liability of a director whereby they are nominated to represent a certain group. (pressure group)
what is a de facto director?
they do the work of a director, are treated as a director but are not formally appointed as a director.
what is a shadow director?
directors that are not employed by the company whereby the company is accustomed to accepting & using their advice, eg. consultants. however, not considered as a shadow director if considered a professional adviser (eg. accountant). s251 CA 2006 vague about who is and isn’t considered “professional adviser”.
what are the 7 fiduciary duties of a director?
- trust
- honesty
- loyalty
- good faith
- confidentiality
- avoid conflict of interests
- no secret profits
which act and sections guide the statutory duties of a director?
companies act 2006
section 171-177
what are the 7 statutory duties of a director?
s171 - 177 CA 2006 :
- act within powers & for proper purposes
- promote success of company
- exercise independent judgement
- exercise reasonable care, skill & diligence
- avoid any conflict of interest
- do not accept benefits from 3rd parties
- must declare interest in any proposed transaction or arrangement with the company
what are the two types of disqualification for a director?
automatic
statutory
what are the 6 reasons for automatic disqualification of a director?
- death
- mental disorder
- bankruptcy
- absence from board meetings for over 6mths without permission
- failure to fulfill shareholding requirements imposed by articles
- by secretary state in “public interest”
what are the 8 reasons for statutory disqualification of a director?
- conviction for indictable offence connected with setting up / managing companies
- persistent failure to make annual returns
- fraudulent trading with intent to defraud
- wrongful trading with insufficient steps to minimise loss
- unfit conduct by director of insolvent company
- general unfitness
- breach of competition law
- influencing conduct of disqualified director
what is the bushel v faith clause?
clause in the articles of association whereby it increases the voting power for the director. this clause protects directors by giving them weighted voting to ensure they essentially don’t get bully voted out of their post.
