Directors Flashcards
Disclosure in relation to directors and secretary
internal register of D and S at registered office, and record of all directors service contract. Can be expected by any member for free, or public for a fees.
Registrar of companies: company must notify registrant of changes in D or S
what information about directors is disclosed in annual accounts?
- salaries, bonuses and pension
- compensation for loss of office
- payments received/ to entity connected to D
- information on advances and credit given by a company to its D
- Guarantees entered into by a company on behalf of D
what is a long term service contract
- a guaranteed contract for more than 2 years
- or a term for shorter period, which can be renewed to 2 years as the directors sole discretion
Guaranteed period= period of two years where D controls how long the contract continues and during this the company can’t terminate contract or can only in specific circumstances.
What approval is needed and what happens if its not attained?
188(2)(a) CA 2006 (combined with s 281(3) CA 2006))
shareholder approval via OR (D cannot vote)
if not revived then contract is void and deemed to cotton a provision which would allow the company to terminate the contract at any time by giving a reasonable notice
What is the exception to the approval requirement
s 188(6)(b) CA 2006 approval is not required by the members of any company which is a wholly owned subsidiary of another company.
What resolution is required to remove D
OR by SH not directors unless resolution allows
what notice must be given for removal
shareholders must serve a special notice on the board for a removal resolution, special notices require a 28 clear days notice before the GM can be held.
A written resolution cannot be used
What safeguards exist for directors facing removal?
Informing- must be informed of resolution and immediately given copy, even if not put on agenda
Representation- in writing (reasonable length) and at meeting
Bushell v Faith clauses in articles- FOR D WHO IS ALSO A SH- weighted voting rights
Shareholders agreement- FOR D WHO IS ALSO SH. This does not stop removal by OR but, D can have a claim against other SHs for breach of SH agreement.
What procedure is required for LTSC
Where the ordinary resolution is to be passed at a General Meeting, s188(5)(b) CA 2006 sets out that a memorandum setting out the proposed contract must be made available for inspection by members of the company both:
a) at the company’s registered office for not less than 15 days ending with the date of the meeting; and
b) at the meeting itself.
A minimum of 15 days’ notice of the GM held to approve the contract will therefore have to be given to shareholders (even if the short notice procedure is followed) unless the written resolution procedure is used.
What resolution is required for compensation for loss of office? what’s the exception
Directors compensation for loss of office must be approved by OR. Unless s 217:
a. payment is no more than £200
b. made in good faith: (i) discharge of existing legal obligation (ii) damages of such obligation, (iii) settlement/ compromise of a claim in connection with termination of persons office/ employment
(iv) by way of pension in respect of past services
NO SH APPROVAL REQUIRED FOR WHOLLY OWNED SUBSIDIARY
how long must the memorandum for payment be available for before GM?
15 days before GM
Do payments made to person connected to D require SH approval?
yes
What are the duty of directors?
171- act within power
172- promote success of business for benefit of members as a whole
173- independent judgement
174- reasonable skill, care and diligence
175- avoid conflicts of interest
176-declare third party benefits
177- declare inter in proposed transaction
172- what considerations may be made for ‘success’
- long term increase non value
- long term consequence
- employees interest
3.need to Forster relationships with supplier, customers etc - impact on community and environment
- maintaining reputation
- act fairly between members
how can compliance of s172 be noted?
Board minutes need to clearly note that consideration to duty was given
what is the skill level required by D
objective- general knowledge, skill and experience that may reasonably expected of someone in their role and
Subjective- the general knowledge, skill and experience of that director
when does a conflict of interest NOT arise
- cannot reasonably be regarded as being a conflict
- transaction between director and company- subject to disclosure s177
- matters authorised by directors
can directors authorise the receipt of a benefit from third party
Ds can’t but SH may
How can D disclose an interest?
Before transaction is entered into:
1. At meeting
2. in writing in advance of BM
3. One-off general notice
when does a director not have to disclose interest?
- not aware
- cannot be reasonable regarded to give rise to conflict
- other directors ought to have known
Can a D vote on board resolution for the transaction where there is a conflict?
No unless:
- unless MA 14 amended
- cannot reasonable give tight to conflict
- conflict arises from a permitted cause
remedy for breach of s174
breach of reasonable skill, care, dilligence
= damages
Remedy for the breach of all duties apart from s174
- injunction
- setting aside transaction
- restitution and account of profit
- restoration of property
- damages
How can approval be saught?
SH approval/ ratification. - If a director holds shares in the company, then any votes to ratify their breach which attach to shares held by them or any person connected with them (e.g., their spouse, children, parents, or a company which they control) will be disregarded
unlawful acts can never be ratified
