Directors Flashcards
Under section (154(1) CA 2006 how many directors should a company have?
- 1 for privacy’s companies
-2 for public companies
What power does section 3 of the model articles provide directors?
Directors power to run the company are contained in MA 3
How can directors exercise their powers without holding a board meeting?
- section m7 and m8 of the CA 2006 allows for directors to exercise their powers as long as they indicate they share the same view as each other
Under the CA 2006 what is a director?
- S 250(1) of CA 2006 is anyone occupying the position of a director
What is the key difference between a executive director and non executive director?
The key difference is that executive directors manage daily operations and are company employees, while non-executive directors provide oversight and strategic guidance without being involved in daily management.
What is a service contract?
It is a directors employment contract
What is a de facto director?
- a director who has never been formally appointed but acts as a director falling under the definition in S 250(1) the the CA 2006 or IA 1986
What is a shadow director?
A shadow director is someone who isn’t officially a director but has a big influence on the company’s decisions. The real directors often follow their advice or instructions, even though the shadow director isn’t officially listed as one. (S 251 (1) CA 2006)
How can a director be appointed?
- under model articles directors are appointed either by the board or by ordinary resolution
In what situations will a director be disqualified?
- if the director is declared bankrupt
- or if a doctor declares them unfit to be a director
After a new director is appointed when must companies house be notified and where else should the change be entered?
- s (167 (1) (a) CA 2006 notification must be submitted within 14 days of the appointment
- form AP01 for a individual director (a person who serves as a director)
- form APO2 for a corporate director (a company that is a director)
- must also enter the director on their register or directs and register of directors home addresses
What is the difference between actual and apparent authority for directors?
Actual authority- when the director has consent from other directors to act in a certain way or enter a particular contract
Apparent authority - acts without the company’s consent but still binds company to contract
How can a director resign?
- complete form TM01 for a individual or form TM02 if the director is a company
-the director will need to also notify companies house
How can a director be removed?
- shareholders can remove a director by means of ordinary resolution (s 168 (2) 2006)
- special notice is required (A special notice is a formal notice given 28 days before a meeting for actions like removing a director or changing the company’s articles. It must be provided by shareholders with a certain shareholding.) (s 168(2) 2006)
What is a bushell v faith clause?
- a provision in a company’s articles that gives certain shareholders or directors extra voting power in specific situations, such as in the removal of a director. It ensures that certain decisions, like the dismissal of a director, can’t be easily made without their consent, even if they’re outvoted by others.
What are the notification requirements for directors?
- companies must keep a register of directors detailing DOB address must be available for inspection for free to shareholders (s 1136)
- keep list of directors residential addresses ( does not need to be open to inspection
- companies house forms CHO1 and CH01 are used to notify a change in details (particulars) of a director
- and forms apo1 and apo2 used to notify companies house of appointment of a director
- forms tm01 and tm02 (for company that acts as director) to notify companies of removal of director within 14 days
What are directors fiduciary duties as codified in CA 2006?
- duty to act within powers s 171 CA 2006
- duty to promote the success of the company s 172 CA 2006
- duty to exercise independent judgment s 173 CA 2006
-duty to exercise reasonable care, skills and diligence - s 174 CA 2006 - duty to avoid conflicts of interest s 175 CA 2006
- duty not to accept benefits from third parties - s 176 CA 2006
- duty to declare interest in a proposed transaction or arrangement - s177 CA 2006
What is ratification of breach?
- when a director has breached their fiduciary duties shareholders can hold a ordinary resolution (s 239 CA 2006) meaning once passed it is as if the breach never occurred for the director
What are the exceptions when a director does not need to declare their interest in in a transaction?
- if the director is not aware of their interest
- if the interest can not be reasonably regarded as likely to give rise to conflict to interest
- if the other directors are aware of the interest
-if it concerns the terms of the directors service contract
What can a court order for wrongful trading ( s214 IA 1986)?
- the court could order director contributes to the companies assets if:
- company is in insolvent administration or insolvent liquidation
- before winding up the director knew a way in which it could have been avoided
- the person was a director of the company at the time
What are the potential remedies for breach of S 171 - 177 of the CA 2006?
Common law equitable remedies would be applicable not limited to:
- an account of profits
- equitable remedies for the losses sustained to the company
-recission of contract entered into
- an injunction
Restoration of property
Who can bring a claim forward for wrongful trading?
- a liquidator
- or administrator
What is misfeasance?
Misfeasance is any breach of any fiduciary or other duty by directors
What makes a transaction an SPT ( substantial property transaction?
Classified under (s 191 CA 2006)
- transaction above £100,000
- if the transaction is worth more than £5,000 and more than 10% of the companies net asset value
- if it involves a director or connected person
- if the director owns 20%shares or has hold 20% voting rights in the other company
How can a director enter into a SPT (substantial property transaction)?
- the shareholders but agree in the form of a ordinary resolution
What asset is classed as substantial?
- any asset with a value of over £100,000
- if the asset is worth more than 5k and more than 10% of the companies net asset value
Can a Comoany make a loan to its directors?
- yes but only if ordinary resolution is passed (s 197 CA 2006)
- memordian setting out terms of loan must be made available 15 days prior to the meeting
What length contract can company enter into device contract with director for?
- no longer than 2 years
- if longer than two years ordinary resolution required
Can a company make a loan to a director?
- Yes under CA 2006 companies can make loans to directors but it must be approved by special resolution
Under section 197 of the CA 2006 the memorandum setting out the terms of the loan and its liability should be available how many days before general meeting?
- 15 days
- if it is a written resolution then It should be sent out
What is the longest a company can enter into a long term service contract?
- no more than two years unless authorised by ordinary resolution
Under the directors disqualification act 1986, how long can the court disqualify a person from being a director?
- between 2 to 15 years
Under the company directors disqualification act 1986 what grounds can a director be disqualified?
- conviction for an indictable offence
- consistent breaches of companies legislation
- fraud on winding up
- summary conviction for failure to file a required notice or document
- following an investigation and a finding of unfitness
- fraudulent wrongful trading
- breach of competition law
What does misfeasance mean?
-a person in a position of responsibility carries out their duty in a way that causes loss or harm (not carrying out duty responsibly)
