Directors Flashcards
Who can be a director?
- Public companies must have at least 2 directors, private must have at least 1
- Every company needs at least one human director 16+
What is an executive director?
Appointed to the board of directors and also have an employment contract with the company
What is a non-executive director?
Appointed to the board and will be registered at Companies House, but they will not have service agreements with the company
Who is the chair person?
They run the company’s meeting and have the casting vote. They only need to use this if they are in favour as a tie means it will not be passed anyway
What is a de factor director?
A person who acts as a director even though they have not been appointed
How long does a company have to notify Companies House of a new director?
14 days
Explain the rules around director’s service contracts
- Board of director’s can decide terms
- If the contract is to have a term of longer than 2 years, then it has to be passed by the shareholder by ordinary resolution
- If the company can end the term in under 2 years, then it will not need approval
How can shareholders remove a director?
By ordinary resolution passed at a general meeting. Special notice is required for a resolution to remove a director
What is special notice?
The ordinary resolution to remove the director is not effective unless notice of the intention to pass it has been given to the company at least 28 days before the general meeting at which the resolution is proposed
What duties do director’s have?
- Duty to act within their powers
- Duty to promote the success of the company
- Duty to exercise independent judgement
- Duty to exercise reasonable care, skill and diligence
- Duty to avoid conflicts of interest
- Duty not to accept benefits from third parties
- Duty to declare interest in a proposed transaction or arrangement
When won’t a director be liable for wrongful trading in a claim?
If they took every step with a view to minimising the potential loss
What is the two-part test to determine whether a director is liable for wrongful trading?
- The general knowledge/skill/experience that are reasonably expected of a person carrying out the same functions as are carried out by that director in relation to the company
- The general knowledge/skill/experience the director has
What is a person connected with a director?
A member of the director’s family or a company in which the director or someone connected with the director:
1. Owns at least 20% of the body’s corporate shares
2. Entitled to exercise or control the exercise of more than 20% of the voting power at any general meeting in the company
What is a non-cash asset?
Any property or interest in property, other than cash
What is classed as substantial?
- Value of £100k
- Worth more than £5k and more than 10% of company’s net asset value
- It only needs to satisfy one of the above
What are the exceptions for the requirement to have an ordinary resolution for a loan?
- Expenditure on company business
- Expenditure on defending civil or criminal proceedings in relation to the company/associated company
- Expenditure on defending regulatory proceedings or defending himself in an investigation by a regulatory authority
- Minor and business transactions, as long as the arrangement does not exceed £10k
What are the most significant liabilities for directors?
- Failure to maintain company records
- Failure to file certain documents at Companies House
- Liability for financial records
- Liability for breach of health and safety regulations
- Bribery
- Making political donations without shareholder approval
- Civil and criminal liability under environmental legislation
What are the grounds for disqualification of a director?
- Conviction for an indictable offence
- Persistent breaches of companies legislation
- Summary conviction for failure to file a required notice or document
- Being an unfit director of an insolvent company
- Following an investigation and a finding of unfitness
- Fraudulent or wrongful trading
- Breach of competition law
