Directors Flashcards
What are the different types of directors?
This is based on Function not title.
Will initially be split between:
De Jure - Formally, Legally appointed and gives written consent to holding the role
Defacto - Not Dejure but performs acts or duties of a director owes the same duties as a director.
What types of directors are there based on function?
Shadow Director - Gives directions or instructions, not in a professional capacity, that the directors of the company follow
Alternate director - Appointed by a director to attend meetings and Vote on their behalf.
Executive director - Usually in full time employment involved in a specific management role.
Non executive director - usually part time non employee who brings outside expertise to the board.
Managing director - Delegated day to day management of the business by the board.
Chairman - Chairs meeting of the board, has casting vote and should be a separate person from other roles.
How is a Director appointed?
Any appointment of or change of details must be notified to the registrar within 14 days.
Appointment by members - Ordinary resolution > 50% Majority. In a PLC each director should be voted on separately.
By existing directors - Existing directors can appoint a new director mid year on a casual basis. At the next AGM this director should stand down to allow members to re elect.
How may directors Cease to act?
Death fo director or winding up of the company
Resignation - in line with the contract of service
Not offering themselves for reelection - where articles provide for retirement & re election of directors.
Removal by company members -Requires resolution with > 50% majority and may run afoul of employment law.
Disqualification - Persistent breeches of the companies act (3 in 5 years)
Conviction of a serious offence in relation to running a company
Fraudulent or wrongful trading
Investigation by DBEIS finds director unfit.
Liquidator find director unfit.
What general duties will a director have in addition to Fiduciary Duties?
To act within their powers - use powers for purpose given
To promote the services of the company, act in good faith and have regard for the following:
1. Long term consequences of any decision
2. Interests of company employees
3. Need to foster business relationships
4. Impact of operations on community and environment
5. To maintain the business reputation.
To exercise independent judgement
To exercise reasonable care and diligence.
To avoid conflicts of interest.
No to accept benefits from 3rd parties.
To declare any interest in a proposed transaction or arrangement.
What may happen if there is a breech of the directors duties?
The members may chose to ratify the action - will not be a breech.
Otherwise the company (not the members) may bring action with the following possible remedies:
1. Director is required to make good any loss
2. Company contracts with the director may be voidable
3. Recovery of property - from the director or a 3rd party
4. Injunction - where the breech has not yet occurred.
NOTE - any provisions to exempt or indemnify directors against breech are void.
What restrictions are there to a directors powers?
General statutory restrictions - Powers must be used for the purpose they are conferred for.
Specific statutory restrictions - decisions which require shareholders approval.
What recourse do members have if they are unhappy with the way the company is run?
Remove the director(s) by members ordinary resolution.
Alter the articles using a special resolution.
What directors actions require approval of the members at a general meeting?
Service contracts for a guaranteed period of two or more years.
Substantial property transactions (between company & director) either >£100k or 10% of company asset value and >£5k.
Loans to directors
Payments for loss of office.
