Directors

Question 1

How many directors must a private and public company have?

Answer 1

Private - at least one director
Public - at least two directors

And every company must have at least one director that is a natural person

Question 2

Are directors’ residential addresses required to be disclosed to the public?

Answer 2

No - only disclosed to public authorities and credit reference agencies.

An individual can obtain a decision from the registrar that his or her protected information is not to be disclosed to a credit reference agency.

Question 3

In summary, what does the UK Corporate Governance Code do?

Answer 3

Attempts to set out principles of corporate governance in the interests of members.

Question 4

What type of companies does the UK CG Code apply to?

Answer 4

Premium listed companies

Question 5

Does UK companies legislation require a company’s directors to manage its business?

Answer 5

No - powers of management are usually set out in the articles.

Question 7

What does the UK CG Code recommend in respect of the composition of the nomination committee?

Answer 7

That independent non-executive directors form the majority.

Question 8

What does the UK CG Code recommend in respect of the composition of the remuneration committee and the audit committee?

Answer 8

That they should consist entirely of independent non-executive directors.

Question 9

Who does the Financial Reporting Council’s Stewardship Code apply to?

Answer 9

Institutional investors

Question 10

What does the UK CG Code say about the role of the senior independent director to shareholders?

Answer 10

He/she should be available to shareholders if they have concerns, which they cannot communicate to, or have failed to resolve with, the chairman, chief executive or another executive director.

Question 11

What is a de facto director?

Answer 11

A person who carries out the functions of a director

Question 12

What is a shadow director?

Answer 12

A person in accordance with whose directions or instructions the directors of a company are accustomed to act.

Question 13

Describe two of the principles that were set out in the Ultraframe case in respect of shadow directors?

Answer 13

At least a consistent governing majority of directors must be accustomed to act in that way.

There may be a period of time before a person becomes a shadow director when directors act in accordance with the person’s directions or instructions but are not yet “accustomed” so to act.

Question 14

In company law, is there a distinction between executive and non-executive directors?

Answer 14

No - though it may cause difficult problems in employment law.

Question 15

What act provides for the disqualification of directors?

Answer 15

The Company Directors Disqualification Act 1986

Question 16

On what grounds might a person be prohibited from being a director?

Answer 16

1. By personal insolvency
2. By being auditor
3. By being too young

4.
By not being human - once CA 2006, s. 156A comes into force

Question 17

What does s. 161 CA 2006 say about the acts of directors?

Answer 17

Validates acts of directors even if it is later discovered that

1. There was a defect in his appointment
2. He was disqualified from holding office
3. He had ceased to hold office
4. He was not entitled to vote on the matter in question

Question 18

What does s. 168 CA 2006 say about the removal of directors?

Answer 18

A company may by ordinary resolution remove a director before the expiration of the directors period of office.

The company must send the director special notice.

The director has a right to make written representations and to speak on the resolution at the meeting.

Cannot use a written resolution to dismiss a director under s. 168.

Question 19

What are certain employment law considerations should be taken into account when removing a director?

Answer 19

Removal may breach the contract under which the person acts as a director if:

• the contract is for a fixed period which has not expired; or
• the director is entitled to a period of notice.

Question 20

Why should an employment act be considered?

Answer 20

Removal of a person from the board which causes loss of that person’s job, which can only be held if that person is a director, is a dismissal for a substantial reason.

Whether or not it is an unfair dismissal would depend on all the circumstances.

Question 21

Does recording someone as a director at Companies House determine whether they are in fact a director?

Answer 21

No - but the fact that a company has permitted a person to be registered as one of its directors is a representation to others that the person is a director which the company may not be allowed to deny.

Question 22

Why is it important to comply with the technical rules that govern directors’ decisions?

Answer 22

For a decision to be valid, the technical rules of the law of meetings must be complied with.

Notice must be given, a quorum must be present and voting must be properly conducted.