Directors Flashcards
How many directors must be a natural person?
Always at least 1
Definition of a director
Anyone occupying the position of a director
Who is a non-executive director?
Appointed and registered as director, but has no service contract
Who is a de facto director?
Acts as a director, but was never formally appointed
Who is a shadow director?
A person in accordance with whose directions the directors are accustomed to act
How are the company’s first directors appointed?
They’re named in the IN01 form
How are the company’s subsequent directors appointed?
By board OR ordinary shareholder resolution
When must Companies House be notified of a new director appointment?
Within 14 days of appointment
What is a long-term service contract?
Contract with a guaranteed term of over 2 years
How can a long-term service contract be approved?
By ordinary resolution
(if not, only the guaranteed term part of it is void)
How can a director be removed?
By ordinary resolution
What notice is required to remove a director?
Special notice: notice of intent to pass the resolution must be given at least 28 clear days before the GM
What is a Bushell v Faith clause?
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
Which 2 registers must a director be added onto?
- register of directors
- register of directors’ residential addresses
What are the s.175 and s.177 directors’ duties?
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
How can a directors’ duties breach be authorised?
By board approval
How can a directors’ duties breach be ratified?
By ordinary resolution
What is the s.182 directors’ duty and when does it apply?
Duty to declare the nature and extent of an interest in an existing transaction as soon as reasonably practicable
(once the transaction has happened)
What are the requirements for a wrongful trading claim?
- 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
Defence to wrongful trading
Took every step with the view of minimising potential loss to creditors as he ought to have taken
When does fraudulent trading occur?
If during winding up, business was carried on with the intent to defraud creditors or others
What is misfeasance?
A breach of duty by a director
What is the remedy for wrongful/fraudulent trading and misfeasance?
Director may have to contribute to the company’s assets
How must a loan to a director be authorised?
Ordinary resolution
When must a payment for loss of office be authorised by ordinary resolution?
If it’s 200 or more, except if the director is legally entitled to it
How long can a court disqualify a director for?
2-15 years
What is the consequence of being disqualified as director?
Cannot promote/form/manage a company without the court’s leave
If does so, it’s a criminal offence (fine or 2 years’ prison)
