Company Management Flashcards
How many directors must a a plc have
at least two
how many directors must all companies have
at least one
How can directors be appointed
signing section 9 document on registration of new company
Appointed by ordinary resolution at an AGM (50%)
Casual vacancy appointed by the board
What type of director is described
a director who is usually charged with performing a specific role, usually an employee of the compnay
executive director
What type of director is described
A director who does not have a particular function but generally just attends board meetings. also considered to be independent viewer of board’s deliberations
NEDs
What type of director is described
The articles usually provide for directors to appoint one or more of their number to take this role, they are charged with carrying out day to day management functions
MD
What type of director is described
a person who acts in place of another director
alternate director
What type of director is described
Someone who cannot be appointed as director (disqualified/don’t want to be) but the board act in accordance with their actions
shadow director
What type of director is described
Anyone who acts as a director by virtue of their conduct rather than by formal appointment
de facto director
Any change in the directors of a company should be recorded in the company’s register of directors and notified to the registrar within
14 days
How may directors be removed
removal - by ordinary resolution with special notice (28 days)
Resignation - in writing
Retirement - not stand for re-election
Termination per the articles
Disqualification
In a public company, how many directors retire at each agm
1/3 OF NED ON FIFO BASIS
Court may / must make disqualification of director
director has been in persistent default of CA 2006
May disqualify - up to 5 years
Court may / must make disqualification of director
Director has committed serious offence
may disqualify - up to 15 years
Court may / must make disqualification of director
director found guilty of fraudulent trading/liable for wrongful trading
may disqualify - up to 15 years
Court may / must make disqualification of director
Secretary of State considers it to be in the public interest
May disqualify up to 15 yeras
Court may / must make disqualification of director
breaches of competition law have occurred
may disqualify - up to 15 years
Court may / must make disqualification of director
person has been director of a company which has at any time become insolvent
Must disqualify
Court may / must make disqualification of director
their conduct as a director of that company makes them unfit to be concerned in the management o fa company
Must disqualify
when court must make disqualification order, what is the time period
2 - 15 years
T/F
Bankruptcy orders will result in automatic disqualification
True
What is the below
applies where company is wound up and directors knew (should have known) that there was no reasonable prospect of the company avoiding going into insolvent liquidation, and they did not take sufficient steps to minimise loss of the creditors
wrongful trading - civil
what is the below
any business of a company is carried on with the intent to defraud creditors of the company or for any fraudulent purpose. the offence is committed by any person who is knowingly a part of a business carried on in that manner
fraudulent trading - civil and maybe criminal
Punishment for fraudulent trading
civil liability
criminal - fine dn or imprisonment for up to 10 years
Where do directors powers come from
the articles of association and the laws of agency
Who do directors owe duty to
the company as a whole
Individual directors only have the power to bind the company if they have
express actual authority
implied actual authority
ostensible/apparent authority
General duties of directors (7)
Act within powers
Promote success of company
Independent judgement
Reasonable skill care and diligence
Avoid conflict of interest
Avoid taking benefits from third parties
Disclose if they have an interest in a transaction
what director duty is defined
Act in accordance with the company’s constitution and exercise powers for purposes conferred
act within powers
what director duty is defined
no precise duty but act in good faith and long term interests of the members
promote the success of the company
what director duty is defined
exercise powers according to own sound judgement
ok to delegate
independent judgement
two tests for reasonable skill care and diligence
- exercise knowledge skill and experience reasonably expected of a director in that position AND
- Exercise the knowledge skill and experience of that particular director
Is it an excuse for a director to stay they lacked expertise if a reasonable director in the same position would have that expertise
No
what director duty is defined
director’s own interest must not actually or potentially conflict with those of a company.
no duty is infringed if the matter has been authorised by the directors.
Avoid conflict of interest
T/F
In private company, directors can authorise conflict if articles do not invalidate
True
T/F in a public company, directors can authorise conflict if articles specifically say so
True
directors must not accept benefit from a third party by reason for
because they are a director
doing/not doing something as a director
If a director becomes aware they have an interest in a contract between company and third party what must happen
must be disclosed to the full board at the next board meeting unless it cannot reasonably be regarded as likely to give rise to a conflice
if a director gives notice they have an interest in a contract between the company and third party, the notice must be
made at board meeting or in writing OR
made by general notice to the directors that the director’s interest in the transaction exists and it should be discussed at the next board meeting
What happens if a director does not give notice of their interest in a contract between the company and third party
contract will be voidable and the director with interest may be liable
Any provision to exempt a director from or indemnify them against liability for breach of duty is
void
T/F
The articles may authorise anything that might otherwise be a breach of statutory duty
True
T/F
Directors will not be liable for breaching statutory conflict of interest rules if they follow any lawful provisions for dealing with them contained in the articles
True
T/F
Articles may normally permit less onerous regulations than CA 2006
False
T/F
Some conflicts of interest by independent directors are permissible by the articles
True
Must the director have regard for the following matter when discharging their duty to promote the success of the company
The impact of the company’s operations on the community and environment
Yes
Must the director have regard for the following matter when discharging their duty to promote the success of the company
The interests of the creditors of the company
No
Must the director have regard for the following matter when discharging their duty to promote the success of the company
The need to act fairly between the members of the company
Yes
Must the director have regard for the following matter when discharging their duty to promote the success of the company
the desirability of maintaining a reputation of high standards of business conduct
Yes
a single member limited company must include
a statement on its register that there is only one member
What is an advantage of a shareholders’ agreement
it does not require registration
What transactions require members’ approval
Service contracts (>2years)
Substantial property transaction
loans and quasi loans
payments for loss of office or on retirement
What are substantial property transactions
lower of assets exceeding £100,000 or 10% of net assets
there is de minimis value of 5000
Failure to obtain approval for payments for loss of office or on retirement will result in
the payment being held on trust for the company
variation of class rights
holders of ?? of the class shares can apply to the court for cancellation
15%
Calling meetings
can be requisitioned by holders of usually more than»_space;> companies»_space; with voting rights
5% of companies paid up capital
notice
of members resolution must be given by the company and requested by members holding???
5% of voting rights
Share buyback
out of capital (private only) who can apply to court to prohibit
any member or creditor
registration
of limited company as unlimited who can prevent
individual members
A member may bring a derivative claim on behalf of the company in respect of
an actual or proposed act or omission by a director which involves negligence or breach of duty or default or breach of trust
Permission for derivative claim refused if
hypothetical director acting to promote the success of the company would not continue with the claim or
The act/omission has been approved by the shareholders.
Unfairly prejudicial or not?
Payment of excessive bonus and pension contributions
Yes
Unfairly prejudicial or not?
Diversion of a company’s business to a director-controlled company
Yes
Unfairly prejudicial or not?
Making inaccurate statement to shareholders
Yes
Unfairly prejudicial or not?
Improper allotment of shares
Yes
Unfairly prejudicial or not?
exclusion and removal from the board
Yes
Unfairly prejudicial or not?
failure by parent to pay debts of sub
not
Unfairly prejudicial or not?
NON-COMPLIANCE WITH stock exchange rules, city code, and Cadbury code
Not
Unfairly prejudicial or not?
Failure to increase petitioner’s shareholding
Not
Unfairly prejudicial or not?
Diversion of the company’s business to a director-controlled company
Yes
Unfairly prejudicial or not?
failure to call a general meeting
Yes
Unfairly prejudicial or not?
late presentation of the company’s accounts
No - bad management
where can orders be made for just and equitable winding up
where company formed for illegal or fraudulent purpose
Complete deadlock in the management of its affairs
Where directors deliberately withhold information from shareholders so that the shareholders had no confidence in the company’s management
Who may call a general meeting (4)
Directors
5% of members
The court (on own motion or on the application of director or member)
An auditor who gives notice of their resignation, accompanied by a state of circumstances connected with their resignation
Specific situation where only public company member meeting called
net assets fall to half or less of the called up share capital
If members request general meeting (with 5% backing_ directors must call meeting with xx days and the meeting must b held within xx days of the director calling the meeting
21
28
Notice of at least xx days must be given of a meeting (unless shorter period of notice agreed)
14
If meeting called by SH not taking place in time, shareholders may call a meeting to take place within…
3 months of the initial request to the directors
Short notice requires support of members holding at least
90% of the nominal value of shares/voting rights
95% public companies
what must be stated in notice to director
time
date
place of meeting
general nature of the business to be discussed
What is special notice
in order to remove director or auditor, shareholders’ must give 28 days notice to the company
Failure for public company to hold AGM RENDERS EVERY OFFICER OF THE COMPANY who is in defualt
liable to a fine
Notice for AGM
21 Days unless all members agree to shorter
Required holding to place item on agenda of meeting
5% or
100 members holding on average £100 each
Notice for ordinary resolution
14 days
Notice for special resolution
depends on type
21 AGM
14 normal
Votes for an ordinary
more than 50%
votes for special resolution
more than or equal to 75%
Do ordinary resolution need to be filed with registrar
only for changes to directors and auditors
Do special resolution need to be filed with registrar
Yes
What kind of meeting is used for the following
any business for which a special resolution is not required specifically by enactment or articles
ordinary
What kind of meeting is used for
liquidations
changes of articles of associations
change in company name
Special resolution
Can written resolution be used for removal of director or auditor
No
For general meeting in public company, what percentage of the voting rights is needed for short period notice
95%
for AGM for public, what percentage of voting needed for short period notice
100%
