Directors Flashcards
Who can be a director?
Can be a natural person, or a company, 16 years of age or older.
What is MA 3
Directors powers to run a company.
What is MA 5
Directors may delegate any of their powers as they think fit.
What are the different types of directors?
NEDs, non-executive directors, or executive directors
What is a director?
Any person occupying the position of director by whatever name they are called.
What are NEDs
Appointed by the board, registered at companies House as directors of the company.
They DO NOT have service agreements with the company. Therefore they do nt recieve a salary. More common in public companies
What are executive directors?
Those who have been appointed to the board of directors and have an employment contract with the company.
What is a chairperson?
Appoint a director to chair board meetings, can do this by passing a board resolution.
Must run the companys board meetings, and have the casting vote at BOARD MEETINGS
What is MA 13
Casting vote given to chairperson at BOARD meetings only
What are de facto directors
Person who ACTS as a director, although they have never been appointed, or validly appointed.
Carry out the job of a director, even though they are not
What are shadow directors?
Person ina ccordance with whose directors or instructions the directors of the company are accustomed to act, but who has not been formally appointed.
In the background, NOT carrying out normal functions, but has GREAT INFLUENCE and CONTROL over the other directors.
What is MA 11
Quorum for directors meetings is 2.
How are directors appointed?
Appointed by board or by ordinary resolution of shareholders (MA17)
Are there any restrictions on being a director?
If they are disqualified from doing so.
Under MA 18, a person ceases to be a director if a bankruptcy order has been made against them, or a doctor gives a written opinion to the company of physical or mental incapability of directors duties.
What are the administrative requirements for a new director?
When a new director is appointed, the company must notify Companies House within 14 days of the appointment. AP01 or AP02 if corporate.
Company must also enter director on register of directors and register of directors residential address.
What is s 188 of CA?
A long term service contract must be approved by shareholders by ordinary resolution
What is s 21 of CA?
Special resolution, you can change articles of a company permanently.
How do you end a directorship?
By resignation Or removal
How does a director resign?
Must complete TM01 within 14 days of resignation.
Director will have t notify companies house of resignation, or give company power of attorney to complete TM01 on their behalf, if the service contract says so
Can shareholders remove a director?
Yes, by ordinary resolution.
Special notice is required however. This is at least 28 days before the general meeting.
It must inform the director in question and give shareholders. Notice of the meeting.
What is the Bushell v Faith clause?
If shareholder and director, will have greater voting rights if the reoslution is to remove them as director
What are directors duties?
Duty to act within powers
Duty to promote success of the company
Duty to exercise independent judgement
Duty to exercise reasonable care, skill and diligence
Duty to avoid conflicts of interest
Duty to not accept benefits from third parties
Duty to declare interest in a proposed transaction
What is s 171 CA?
Directors duty to act within powers
How much a director act within powers? S 171
Must act in accordance with companys constitution,
And only exercise powers for the purpose for which they are conferred
What is s 172
Duty to promote the success of the company
How must directors promote the success of the company?
Must act in a way that they consider would be most likely to promote the success for all members.
Likely consequences of any decisions
Interests of companys employees
Need to foster companys business relationships
Impact of companys operations
Desirability of company maintains reputation for high standards of business conduct
Need to act fairly as between members
How will the court determine if a director has breached their duty to act for success of te company?
Subjective test to ascertain whether a doctor has breached this duty.
What is s 173
Duty to exercise independent judgement
How must directors excise independent judgement?
In accordance with an agreement duly entered into by the company taht restricts the future exercise of discretion by its directors, or,
In a way authorised by the companys constitution.
What is s 174
Duty to exercise reasonable care skill and diligence
How must a director exercise reasonable skill care and diligence?
General knowledge, skill and experience that may be reasonably expected from a person carrying out functions of a director
AND
General knowledge, skill and experience that THAT director has.
What is s 155
Duty to avoid conflicts of interest.
Must void situations in whcih they ave, or can have, a direct or indirect interest tha conflicts with interests of the company.
What is the difference between 175 and 177
175 does NOT apply to a confluct of interest arising in relation to a transaction or arrangement WITH the company. This is 177.
175 relates to a contract in which the company is NOT involved.
What is s 176
Duty not to accept benefits from third parties
Can a director accept benefits from third parties?
NO, s 176.
A director msut not accept a benefit form a third party conferred by reason of them either being a directr, or doing anything as a director.
What is s 177
Duty to declare interest in a proposed transaction or arrangement
What is the scope of s 177? And how is it differnet to 175 and 182?
177is the duty to declare the NATURE and EXTENT of that interest to the other directors, if the company enters into a transaction or arrangement in question.
175 is to do with something that the company is not involved in
182 is an already existing transaction
What are the exceptions to the duty to declare in s 177?
If the director is NOT AWARE of interest
If the interest cannot be regarded as likely to give rise to confluct of interest
If hte directors are already aware of it
If it concerns the terms of the directors service contract
What is ratification of a breach?
The shareholders can ratify a breach or potential breach, by ordinary resolution.
If ratified, it is as if the director did not rbeach their duty at al, and director will escape liability to the compay for breach.
What is s 182?
Declaration of interest in an EXISTING transaction
When does s 182 not apply?
If the director has already declared it under s 177
How is s 182 contrast to s 177?
The declaration MUST be made at a meeting of the directors, or by notice sent to al of the other directors, or by general notice of the interest given at a board meeting.
What is wrongful trading?
S 214 IA.
If the company has gone into insolvent liquidation or administration, and before commencement of the winding up of the company, the director KNEW< or OGUHT TO have CONCLUDED, that there was no reasonable prospect that the company woudl avoid insolvent liquidation, and still traded.
What is the defence for wrongful trading?
A director will not be liable for wrongful trading if they took every step with a view to minimise the potential loss to the companys creditors as they ought to have taken.
What is the 2 part test for directors knowledge?
Subjective and objective
What a reasonable director ought to know
What THAT director knowledge has
What is fraudulent trading?
If in the course of the company being wound up, it appears that the companys business has been carried on with intend to defraud creditors of the company, or creditors of any other person, for any fraudulent purpose.
What are SPT
Substantial prperty transact is.
Where a director in their PERSONAL CAPCIT, or someone connected, buys from or sells to the company, a non cash asset of substantial value
How can an SPT be entered into?
By ordinary reoslution.
Who is considered connected with a director for the SPT?
Family, or company which:
- director owns at least 20 % of the corporate shares, entitled to 20% voting rights
What counts as substantial for an SPT?
If it is over 100,000
OR
Worth 5,000 or more, AND more than 10% of the company’s net asset value
What is the effect of a breach of SPT?
Transaction is vOIDABLE. S 195
Also, the individuals may be ordered to account to the company for any gain they have made, and to indemnity the company for any loss or damage.
Can you give a loan to a director?
Yes, ordinary resolution.
What are the exceptions to the requirement of an ordinary resolution for a director loan?
Expenditure on company business. This covers costs for purpose of company, or able to perform their duties. Max of 50,000
Expenditure on defending civil or criminal proceedings in elation to company or associated company
Expenditure on defending regulatory proceedings or defending himself or herself in an investigation by a regulatory authority
Minor and business transactions, as long as the transactions do not exceed 10,000
What are other liabilities which directors hold?
Failure to maintain company records is an offence punishable by fine
Facile to file certain documetns at companies house
Liability for financial records
Liability for rbeach of health and safety legislation
Bribery
Making political donations without shareholder approval
When can the court disqualify a person from being a director?
Conviction of indictable offence
Persistent breaches of companies legislation
Fraud on a winding up
Summary conviction for failure to file required notice
Being unfit of insolvent company
Following Investifationa dn funding unfitness
Fraudulent or wrongful trading
Breach of competition law
How long can a director be disqualified by the court for?
Between 2-15 years
