Directors Duties And Responsibilities Flashcards
Who are directors accountable to?
The company itself rather than the shareholders directly.
What is directors’ role?
Manage the company on a day-to-day basis - on an agency basis.
What are the categories of director?
• de jure; • de facto; • shadow directors. In practice, executive and non-executive.
What is the minimum number of directors for a private company?
1.
What is the minimum number of directors for a public company?
2.
Can a company be appointed as a director?
Yes - although every company must have at least one director who is a natural person to ensure accountability.
Is there a maximum number of directors allowed under the model articles?
No.
How old must you be to be appointed a director?
16.
What is a de facto director?
Someone who assumes to act as a director but has not been validly appointed.
What is a shadow director?
A person in accordance with whose directions or instructions the directors of the company are accustomed to act.
For example, a friend of a director who gives advice from ‘behind the scenes’ would be seen as a shadow director.
Are professional advisors considered shadow directors?
No.
Who is an executive director?
A director who has been appointed to executive office, generally spending the majority of their working time on the business of the company.
Who is a non-executive director?
An officer of the company who will not be an employee and does not take part in day-to-day running.
What is an alternate director?
An alternate director is usually a fellow director or someone approved by a resolution of the board, having the voting powers of the absent director.
Do the Model Articles provide for the appointment of alternate directors?
No.
What are a company secretary’s main duties?
Keep the company books up-to-date, produce minutes of meetings, and ensure necessary filings are made.
Is a private company required to have a company secretary?
No (unless articles require them to).
Is a public company required to have a company secretary?
Yes.
How is the appointment of directors governed?
By the articles of the company.
How would companies with Model Articles appoint a director?
By an ordinary resolution of the shareholders or by a decision of the directors.
Should directors be provided with a service contract?
Yes - they are an employee.
What should a service contract set out?
Terms and conditions of employment including duties, remuneration package, notice provisions, etc.
There is no automatic entitlement for directors to be paid for their services - this is something that the board can determine, subject to the provisions of the company’s articles.
Where should a company keep directors’ service contracts?
At its registered office for inspection by the members.
Can an individual be a director and a shareholder of a company?
Yes.
Should every company maintain a register of its directors?
Yes.
What must a company’s register of directors contain under CA 2006?
Name and any former name; a service address; the country or state of residence; nationality; business occupation; date of birth.
Is a director’s residential address open to public inspection?
No - it needs to be provided but kept on a separate secure register.
What must the company’s register of secretaries contain?
Name and any former name; address.
What must be disclosed in a company’s annual accounts?
the directors’ salaries, bonus payments and pension entitlements; and
compensation paid to directors and past directors for loss of office.
any payments made to, or receivable by, a person connected to such a director or a body corporate controlled by a director.
information on advances and credits given by a company to its directors and guarantees entered into by a company on behalf of its directors.
Applies to any person who was a director at any time during the applicable finanacial year
How can a director be removed?
By ordinary resolution by the shareholders.
What notice is required for a removal resolution?
Special notice - 28 days.
Are directors who are also shareholders allowed to vote on their removal?
Yes.
What are the other ways for vacation of office?
Resignation by notice - It is usual, although not obligatory, in these circumstances for the board to pass a board resolution accepting the letter of resignation.
Automatic termination -the director becomes disqualified from being a director
the director becomes the subject of an individual voluntary arrangement (or similar);
the director becomes bankrupt,
a registered medical practitioner who is treating the director states in writing to the company that the director has become physically or mentally incapable of acting as a director and will remain so for more than three months
What are the filing requirements when a director leaves office?
Update the company’s register of directors and give notice to Companies House by filing form TM01.
What are the general duties of directors?
Duty to act within powers; promote the success of the company; exercise independent judgment; exercise reasonable care, skill, and diligence; avoid conflicts of interest; not accept benefits from third parties; declare any interest in a proposed transaction.
What does the duty to promote the success of the company mean?
A director must act in a way that promotes the success of the company for the benefit of its members as a whole.
Does the duty to exercise independent judgment mean directors cannot rely on the advice from others?
No, they can rely on advice but must make their own judgments.
How will the duty to exercise reasonable care, skill, and diligence be assessed?
objectively and subjectively.
The required level is the level of skill, care and diligence which would be exercised by a reasonably diligent person with:
the general knowledge, skill and experience that may reasonably be expected of someone in their role; and
the general knowledge, skill and experience of that director.
What does the duty to avoid conflicts of interest require?
A director must avoid situations where they have a direct or indirect interest that conflicts with the interests of the company.
What conflicts of interest are excluded under the duty to avoid conflicts of interest?
Conflicts arising in relation to transactions or arrangements with the company.
