Decision Making Flashcards
What is the key distinction between a company’s owners and its managers?
Shareholders own the company, while directors manage it.
Most binding company decisions are made by directors, with shareholder input required only under specific circumstances.
List four common transactions that require shareholders’ input.
- Granting directors permission to allot shares
- Making changes to the company’s articles
- Approving a substantial property transaction between the company and a director
- Approving a director’s service contract of a fixed length exceeding 2 years
Where are directors’ decisions typically made?
During board meetings.
Name three common provisions found in a company’s articles regarding board meetings.
- Calling of board meetings and notice required
- Quorum for meetings
- Requirement for majority or unanimous decisions
What is a quorum in the context of board meetings?
The minimum number of directors that must be present to validate the meeting and make decisions, often set at two directors.
Explain the chairman’s casting vote.
A vote used by the chairman to break a tie at a board meeting.
What must directors do under Section 177 of the Companies Act?
Declare the nature and extent of their interest in a proposed transaction or arrangement with the company.
Under Section 182 of the Companies Act, what additional declarations must directors make?
Declare their interests in pre-existing transactions or arrangements to which the company is a party.
What are general meetings, and who participates in them?
Forums for shareholders’ decisions, involving all members of the company, directors, and auditors (if appointed).
What are the two main requirements for a shareholders’ resolution to be validly passed at a general meeting according to Section 301?
- Notice of the meeting and the resolution is given
- The meeting is held and conducted
How can notice for a general meeting be given under Section 308 of the Companies Act 2006?
In hard copy form, electronic form, or via a website.
What is required for shareholders to consent to a shorter notice period for a general meeting in a private company?
A majority in number of shareholders holding at least 90% of the voting share capital.
What notice period is required for a general meeting under Section 307, and what is the exception?
At least 14 days’ notice is required, except for an annual general meeting of a public company which requires at least 21 days’ notice.
In the provided example, why is sending notice on 6th May insufficient for a 20th May general meeting?
It does not provide 14 clear days’ notice.
When should notice be sent to satisfy a 14-day notice period for a meeting on 20th May?
By 3rd May to allow 48 hours for deemed receipt.
What must the notice of a general meeting include?
- The time, date, and place of the meeting
- An indication of the business to be conducted
What can shareholders do if the board fails to call a general meeting after a request by at least 10% of shareholders?
Requisitioning shareholders can call the meeting themselves.
What factors must be considered when calculating notice periods for general meetings?
- Clear days of notice
- Shareholder notice timing based on the method of transmission
Why might companies with few directors find declarations of interest problematic?
It may render a meeting inquorate.
How can companies anticipate situations where a director’s declaration of interest affects quorum?
Articles may allow lifting restrictions by a prior ordinary resolution of shareholders.
