Directors

Question 1

Define the 10 types of directors…

Answer 1

1. Director= any person occupying the position of director
2. De Jura director= a person who is formally and legally appointed or elected as director as per articles
3. De facto director= a person who performs the acts or duties of a director
4. Managing director= articles allow the board to delegate any powers they see fit
5. Shadow director= a person in accordance to act
6. Executive director= likely to be a full time employee involved in management
7. Non-executive director= part time. Brings outside expertise to the board. Not an employee. Exerts control over executive director
8. Chair manager of board= chairs meetings of the board. Acts as spokesman for company and has a casting vote.
9. Chief executive= responsible for leadership of the company and managing it within powers delegated by the board.
10. Alternate director= appointed by a director to attend and vote in board meetings when they cannot attend

Question 2

Appointment of directors

Answer 2

1. 16 years+
2. First director named in registration of the company
3. Appointed by existing directors or by ordinary resolution
4. Notify companies house within 14 days of new appointment
5. service contract cannot exceed 2 years unless approved by ordinary resolution of members

Question 3

Removal of directors

Answer 3

1. Ordinary resolution with special notice (28 days)
2. Notice to all directors and members entitled to vote
3. Director can require company to circulate written representation
4. Director can read out representations

Question 4

Duties of directors

Answer 4

1. Act within powers
2. Promote success of company
   - consequences of decision in the long term
   - interests of company’s business relationships
   - impact on the community and environment
   - company maintaining high standards of business conduct
   - act fairly as in company
3. Exercise independent judgement
4. Exercise reasonable care, skill, and diligence
   - general knowledge, skill, experience of person functioning as a director
   - expect all directors to apply skill appropriate to their function
5. Avoid conflicts of interest
   - position of power, don’t abuse trust. Any conflicts must be disclosed by board.
6. Not accept benefits from 3rd party
7. Disclose interest in a proposed transaction

Question 5

Division of power within a company

Answer 5

1. Board of directors manage the business on day to day basis
2. Members make decisions about the running of the business in a general meeting
3. Directors are required to exercise their powers in accordance with the company’s constitution
4. Board as a whole hold power
5. Directors not subject to members instruction on how to act

Question 6

Restrictions putting power in members rather than directors

Answer 6

1. Some actions require a resolution
2. Director can be removed at any time by ordinary resolution of the members and they may see fit to exercise this right should their views be ignored
3. Members can alter the articles by passing a special resolution. This power could therefore be used to restrict the directors’ powers

Question 7

Statutory control over directors

Answer 7

Certain matters require the approval of members in a general meeting in order to be valid. These are as follows:

1. Directors service contract- longer than two years
2. Substantial property transaction- occurs where a director acquires from the company a substantial non-cash asset (exceeds £100 000 or 10% of company’s asset + more than £5000)
3. Loan to directors
4. Non contractual payments to directors

Question 8

Disqualification of directors

Answer 8

• Model article says directors must vacate office if they become insane or bankrupt

Question 9

Company directors disqualification act…

Answer 9

• 1986

- introduced due to public request

Question 10

What can the court disqualify for up to 15 years for

Answer 10

1. Person convicted of serious offence in connection with management of a company
2. Participation in fraudulent or wrongful trading
3. If Secretary of State considers it in public interest to disqualify
4. Guilty of breaches in competition law
5. Liquidator finds director unfit to manage a company

Question 11

What can the court disqualify for up to 5 years for?

Answer 11

1. Persistently in default of company legislation

2. Person acting on behalf of a disqualified director

Question 12

Breach of a disqualification order is a…

Answer 12

-criminal offence and can result in a fine or imprisonment