Directors Flashcards
Directors’ decision-making
Directors make decisions collectively in board meetings and they are called board resolutions. The CA and model articles set out various requirements which must be satisfied in order for a board meeting to be valid.
Notice of board meetings
When a director calls a board meeting they must give notice to the other directors. The notice must be reasonable and this will depend on the facts. No need for notice to be in writing but it must include the time, date and place of the meeting.
Quorum at board meetings
A quorum of two directors who are entitled to vote must be present at all times during the board meeting.
Director’s personal interests
A director may not count in the quorum or vote if a proposed decision of the board is:
- Concerned with an actual or proposed transaction or arrangement with the company
- In which a director is interested
Declaring personal interests
They must declare the nature and extent of this interest to the board.
Exceptions to declaring personal interests
A director does not need to declare their interest in a proposed transaction or arrangement with the company:
a) If it cannot reasonably be regarded as likely to give rise to a conflict of interest
b) If or to the extent that the other directors are already aware of it
c) If or to the extent that it concerns terms of a service contract (Contract of employment only)
Voting at board meetings
Board resolutions are passed by a simple majority which means that over half of those present must vote in favour in order for the board resolution to be passed. Voting is carried out by a show of hands and each director has one vote. If the board has appointed one of its directors to act as chair of the board that director will have a casting vote in the event of a tie.
Unanimous decisions
It is possible to pass a board resolution in the form of a resolution in writing or any other method which shows that all eligible directors have indicated to each other that they share a common view on the matter. To use this method the directors must vote unanimously in favour of a resolution
Who can be a director?
Company directors do not have to be a natural person (human being) but every company needs at least one director who is a natural person and who is 16 years of age or older.
Types of director - Executive director
Are those who have been appointed to the board of directors and also have an employment contract with the company
Types of director - Chairperson
Is a director who chairs board meetings. This person has a casting vote in the event of a tie.
Types of director - De facto director
This is a person who acts as a director although they have never been appointed or validly appointed.
Types of director - Shadow director
A person in accordance with whose directions and instructions the directors of the company are accustomed to act but who has never been formally appointed as a director of the company. Likely to be in the background and not carrying out the normal functions of director but they will have a great deal of influence and control over the other director’s actions.
Types of director - non-executive director
Appointed to the board but do not have a service contract and so are not employees of the company.
Directors authority
Directors are agents of the company. Directors have both actual and apparent authority to bind the company into contracts with third parties.
