Directors' duties and responsibilities Flashcards
how to appoint directors?
ordinary resolution of the shareholders or decision of directors.
what are 7 duties of directors?
- duty to act within powers.
- promote success of the company for the benefit of the members as a whole.
- duty to exercise independent judgement.
- duty to exercise reasonable care, skill and diligence.
- avoid conflicts of interest.
- not accept benefits from third parties.
- duty to declare any interest in a proposed transaction.
when can a director NOT make a declaration when they have a interest in a proposed transaction>
- director is not aware of the interest or arrangement in question.
- interest cannot reasonably be regarded as likely to give rise to a conflict of interest,
can a director who is interested in a transaction vote or count in the quorum in the board resolution.
NO!!!
WHAT is a director’s long term service contract?
- Shareholder approval by ordinary resolution is required for any director’s service contract which is, or may be, for a guaranteed period in excess of two years (s 188(2)(a) CA 2006).
- ALSO NEED A WRITTEN MEMORANDUM- written summary of the terms of the contract.
- Under s 188(6)(b) CA 2006 approval is not required by the members of any company which is a wholly owned subsidiary of another company.
- Minimum of 15 days notice of the GM held to approve the contract will be given to shareholders.
what is a substantial property transaction and what is needed to approve it?
To other directors or a connected person.
Worth more than £100,000/
An asset worth more than £5,000, but not more than £100,000 is a substantial asset only if it is worth more than 10% of the company’s net asset value.
Must be approved by ordinary resolution and written memorandum.
do loans need to be shareholder approved for a private company not associated with a public one?
- Ordinary resolution is needed to approve loans to its directors or to directors of its holding company or give guarantees or enter into security.
- Only transactions for private.
- Not quasi-loans.
do loans need to be shareholder approved for a private company associated with a public one and public ones?
- Shareholder approval is needed for loans:
- Quasi-loans.
- Loans to a person connected to a director,
- Guarantees or security in respect of any such loans, quasi-loans or credit transactions with their directors and directors of a holding company or persons connected with such directors (s 197, 198, 200, 201).
- BOTH SHAREHOLDER IS NEEDED.
again, minimum of 15 days notice of the general meeting held to approve the transaction is to be given to shareholders unless written resolution is used.
must a director disclose their interest for loans or their own service contract?
YES and cannot vote on their own contract.
can a director vote on the resolution or count towards the qourum on a transaction he is interested in?
NO!!!!!!!!!!!
what happens if a loan is not approved by ordinary resolution?
loan is voidable and director involed is liable to account for any profits and indemnify the company for any losses incurred.
what happens if a substantial property transactions is between a company and a director of the company’s holding company or a person connected to a director of the holding company?
holding company will also need to approve the transaction by OR.
BUT approval is not required if a wholly owned subsidiary of another company.
How can breaches of duty be ratified?
By ordinary resolution of the shareholders.
- interested director cannot vote in their own favour, nor can people connected to them.
what can a company do if a director breaches their duties?
- can set aside the transaction.
- claim damages.
- terminate service contract if there is a provision within it that states this.
- can disqualify director under Company Directors disqualification act 1986.
How many days notice is needed prior to general meeting to approve service contract or to loan to directors?
15 days.
