Directors

Question 1

General Duties

Answer 1

s.170 - Scope and nature of general duties
s.171 - Duty to act within powers
s.172 - Duty to promote the success of the company
s.173 - Duty to exercise independent judgment
s.174 - Duty to exercise reasonable care, skill, diligence
s.175 - Duty to avoid situation of conflict of interest
s.176 - Duty not to accept benefits from third parties
s.177 - Duty to declare interest in proposed transaction
s.180 - where s.175 authoirsed by directors or s.177
complied with, transaction not to be set aside by
rule requiring approval of members (unless Arts)
s.182 - Duty to declare interest in existing transaction
s.183 - Failure to make s.182 disclosure = offence.
s.184 - Written notice
s.185 - General notice (covers future dealings with same
party)

MA 14 (1) - If director has conflict with proposed or
actual transaction with company, director not
to count towards quorum or voting, unless (2)

s.178 - Civil consequences of breach

Question 2

Long Term Service Contracts and Substantial Property Transactions

Answer 2

s.188 - Directors’ long term service contracts - approval
s.189 - if breach of s.188, provision void to extent of
contravention, and contract terminable on
reasonable notice by company.

s.190 - SPTs - members’ approval
s.191 - ‘substantial non-cash assets’
s.192 - Exception for transfers between members or
other group companies
s.195 - SPTs: civil consequences

s. 239 - Ratification
s. 252 - Persons connected with a director
s. 253 - Members of a directors’ family
s. 254 - Director connected with a body corporate

Question 3

Loans, quasi-loans and credit transactions

Answer 3

s.197 - Loans to directors require members’ approval
s.198 - Quasi-loans (public cos) - members’ approval
s.199 - Meaning of quasi-loan
s.200 - Loans OR quasi-loans to persons connected
with a director (only public cos)
s.201 - Credit transactions (public cos)
s.202 - Meaning of credit transaction
s.204 - Exception: approval not required if spending
on company business (up to £50,000).
s.207 - No approval needed if value less than:
> £10,000 for loans and quasi-loans
> £15,000 for credit transactions
s.213 - Civil consequences of contravention
s.214 - Subsequently affirmed by members

s.232 - Provisions purporting to exempt directors from
liability
s.233 - Insurance (for directors’ breach of duty)
s.234 - Qualifying Third Party Indeminity Provisions

s.256 - Associated companies

s.413 - Must show details about directors’ benefits in
notes to accounts

s.1159 - Meaning of a ‘subsidiary’

Question 4

Loans to directors: approach

Answer 4

(1) What is the nature of the company? (Public or private?)
(2) What is the nature of the transaction?

(3) Is shareholder approval required and, if so, under
what section of the Act?

(4) If shareholder approval is required, is there a
statutory exemption instead?

(5) If not, what is the sanction for not obtaining shareholder approval and for which persons?

(6)Are the directors complying with their statutory
duties?

Question 5

Qualifying Third Party Indeminity Provisions

s.234 CA

Answer 5

Indemnity against any liability EXCEPT if incurred:

• to the company/associated company; or
• to pay a criminal fine or regulatory penalty; or
• in defending criminal proceedings in which he is
  convicted; or
• in defending civil proceedings brought by the
  company in which judgment given against him; or
• in an unsuccessful application for relief from
  liability under s.661/s.1157 Companies Act 2006