Directors

Question 0

Remedy for statutory duties other than S174?

Answer 0

Injunction
Set aside transaction
Restitution
Account for profits
Restore property
Damages

Question 1

Remedy for breach of S174 CA?

Answer 1

Damages only (S is not a fiduciary duty)

Question 2

Remedy for breach under CDDA ‘86?

Answer 2

Termination of service contract and disqualification. Max 15 years

Question 3

What type of action can SH bring when D has breached statutory duty?

Answer 3

Derivation action under S260

Question 4

Re British American Corporation (1903)

Answer 4

Under S177 CA (disclose interest in PROPOSED transaction)
When a director of company A, who is also a shareholder of company B, he/she will be deemed to be indirectly interested in any transaction that takes place between company A and company B

Question 5

Declaring notice of interest

Answer 5

S184, if disclosed in writing (i.e. not at board meeting) should be sent in electronic or paper form to all Ds.

S185 - can give general notice if will always be considered in a particular company or connected person.

Just because disclose interest - does not mean you do not have to comply with other statutory duties

Question 6

Model Article 14

Answer 6

Cannot vote or count in the quorum where D is interested in the actual or proposed transaction (unless exception applies)

Question 7

2) Director service contracts

Answer 7

S188 - need ordinary resolution where length of contract is or may be more than 2 years

S228 - must keep copy of service contract for 1 year after termination / expiry

Question 8

3) Substantial property transactions

Answer 8

S190 - includes buying or selling

Will be void unless resolution no longer possible, company has been indemnified or voiding affects a good faith purchaser’s rights

Can be affirmed by SH within reasonable period (S196)

Regardless of whether avoided, D is still liable to account for gain / loss.

Defence if took all reasonable steps or had no knowledge surrounding contravention

Question 9

4) Loans to directors

Answer 9

OR by shareholders required before transactions take place

Important distinction between private companies VS public companies / associated private companies

Question 10

4) Guaranteeing / providing security for loan to director

Answer 10

I.e. company is guarantor for loan D takes from bank, or directly provides security to bank for loan on behalf of D

Question 11

Meaning of ‘associated company’?

Answer 11

S256 - either direct subsidiary of company or both under joint control with parent company (sister company)

Question 12

Exceptions to no loans to director rules?

Answer 12

S204 - expenditure on company business (incl. to perform role of D)

S205 - defending legal proceedings

S207 - minor transactions
loans up to 10k
credit transactions up to 15k or what is reasonable and ordinary course

S209 - where company’s ordinary business includes making loans or quasi loans

Can later be affirmed by SH

Approval NOT required where company is a wholly owned subsidiary

Question 13

Defence to no loans to director rules?

Answer 13

Took all reasonable steps to prevent

Had no knowledge of circumstances surrounding contravention

Question 14

Does the S175 duty to avoid conflicts of interests apply to loans / substantial property transactions?

Answer 14

No under S175(3)

But S177 & S182 still do apply

MUST remember to disclose interest to board in procedure plan

Question 15

S232 CA 06

Answer 15

Company cannot indemnify director for loss he/she incurs as a result of breach / negligence / default etc

MA52 gives the right to indemnify not outside of normal company law rules in CA