Directors Flashcards
What are the different types of Directors?
De Jure director - a director who has been appointed;
De facto director - A person who has never been appointed but acts as such;
Shadow director - A person who controls the directors of the company, but is not appointed as a director;
Non-executive director - appointed to the board, but are not employees of the company.
How are directors appointed?
Via a BR or OR.
BR is preferred as it is quicker.
When a director is appointed, how long does the company have to notify companies house?
Within 14 days of the appointment (AP01 individual, AP02 corporate director).
How long can a directors’ service contract be without shareholder intervention?
Up to 2 years.
This doesn’t mean it is a maximum of 2 years, a contract can be for 10 years without shareholder approval. However, there must not be a fixed term for more than 2 years, e.g. the company can terminate this contract with 6 months notice at any material time.
What happens if the directors do not obtain the requisite consent from the shareholders for a fixed term of more than 2 years?
The clause guaranteeing the term is void;
The shareholders can terminate the appointment of the director at a reasonable notice.
How can a director’s service contract end?
It can only be terminated in accordance with its terms or if the director committed a repudiatory breach of their contract.
How can directors be paid compensation on leaving the company?
Via ordinary resolution of the shareholders.
Unless:
- it is under £200
- the payment is made in good faith under discharge of existing legal obligation, by way of damages in respect of obligation, in settlement, or pension
What are the Director’s Duties in the Companies Act (171-174)?
(171) To act within Powers
(172) To promote the success of the company for the benefit of the members as a whole
(173) Duty to exercise independent judgement
(174) Duty to exercise reasonable care, skill and diligence (assessed objectively - what a director should know; and subjectively - what that specific director knows)
What are the Director’s Duties in the Companies Act (175-177)?
(175) Duty to avoid conflicts of interest;
(176) Duty not to accept benefits from third parties;
(177) Duty to declare an interest in a proposed transaction (not necessary if: Director not aware of the transaction; interest cannot reasonably be regarded to give rise to a conflict of interest; other directors are aware of the conflict.
What is s182 and its ramifications?
A director, who is directly or indirectly interested in a transaction or arrangement entered into by the company, must declare the nature and extent of their interest at a meeting of directors, or in writing, or by general notice at a board meeting.
Must be declared ASAP.
Failure to comply is a criminal offence.
What are the 4 exceptions to the duty to declare under s182?
(i) If the director is not aware of the interest, they’re not under a duty;
(ii) if the interest cannot be reasonably regarded to give rise to a conflict of interest;
(iii) if the other directors are aware, no need;
(iv) if it concerns the terms of the director’s service contract
Can a director interested in a transaction or arrangement with the company vote or count in the quorum for the resolution?
No.
When can a director count in the quorum of a transaction they are personally interested in?
MA14: Can be removed and replaced with article allowing interested director to count in such a quorum.
Can shareholders ratify a breach of directors’ duty? How?
Yes - via an ordinary resolution.
However, a director cannot ratify their own breach if they are a shareholder.
Do personal director loans require shareholder approval?
Yes. However, the exception is that any loan under £10,000 does not require shareholder approval.
