Directors

Question 1

How many directors must be a natural person?

Answer 1

Always at least 1

Question 2

Definition of a director

Answer 2

Anyone occupying the position of a director

Question 3

Who is a non-executive director?

Answer 3

Appointed and registered as director, but has no service contract

Question 4

Who is a de facto director?

Answer 4

Acts as a director, but was never formally appointed

Question 5

Who is a shadow director?

Answer 5

A person in accordance with whose directions the directors are accustomed to act

Question 6

How are the company’s first directors appointed?

Answer 6

They’re named in the IN01 form

Question 7

How are the company’s subsequent directors appointed?

Answer 7

By board OR ordinary shareholder resolution

Question 8

When must Companies House be notified of a new director appointment?

Answer 8

Within 14 days of appointment

Question 9

What is a long-term service contract?

Answer 9

Contract with a guaranteed term of over 2 years

Question 10

How can a long-term service contract be approved?

Answer 10

By ordinary resolution
(if not, only the guaranteed term part of it is void)

Question 11

How can a director be removed?

Answer 11

By ordinary resolution

Question 12

What notice is required to remove a director?

Answer 12

Special notice: notice of intent to pass the resolution must be given at least 28 clear days before the GM

Question 13

What is a Bushell v Faith clause?

Answer 13

A clause giving greater voting rights to a shareholder who’s also a director in voting on the ordinary resolution to remove him as director

Question 14

Which 2 registers must a director be added onto?

Answer 14

• register of directors
• register of directors’ residential addresses

Question 15

What are the s.175 and s.177 directors’ duties?

Answer 15

s.175: duty to avoid conflict of interest (does NOT apply to transactions WITH the company)
s.177: duty to declare interest in a proposed transaction
(applies to transactions WITH the company)
They’re mutually exclusive

Question 16

How can a directors’ duties breach be authorised?

Answer 16

By board approval

Question 17

How can a directors’ duties breach be ratified?

Answer 17

By ordinary resolution

Question 18

What is the s.182 directors’ duty and when does it apply?

Answer 18

Duty to declare the nature and extent of an interest in an existing transaction as soon as reasonably practicable
(once the transaction has happened)

Question 19

What are the requirements for a wrongful trading claim?

Answer 19

• company is in insolvent liquidation/administration,
• before winding up, director knew/should’ve known there was no reasonable prospect the company would avoid it, and
• he was a director at the time

Question 20

Defence to wrongful trading

Answer 20

Took every step with the view of minimising potential loss to creditors as he ought to have taken

Question 21

When does fraudulent trading occur?

Answer 21

If during winding up, business was carried on with the intent to defraud creditors or others

Question 22

What is misfeasance?

Answer 22

A breach of duty by a director

Question 23

What is the remedy for wrongful/fraudulent trading and misfeasance?

Answer 23

Director may have to contribute to the company’s assets

Question 24

How must a loan to a director be authorised?

Answer 24

Ordinary resolution

Question 25

When must a payment for loss of office be authorised by ordinary resolution?

Answer 25

If it’s 200 or more, except if the director is legally entitled to it

Question 26

How long can a court disqualify a director for?

Answer 26

2-15 years

Question 27

What is the consequence of being disqualified as director?

Answer 27

Cannot promote/form/manage a company without the court’s leave
If does so, it’s a criminal offence (fine or 2 years’ prison)