Directors duties and responsibilities Flashcards
What are the 4 exceptions to the need for shareholder approval?
- Expenditure on company business - s.204
- Expenditure on defending proceedings - s.205
- Minor and business transactions - s.207
- Loans / quasi loans by a money-lending company s.209
What is the limit for the exception on expenditure on company business - s.204
It is limited to expenditure the aggregate amount of which is £50,000 or less. If the value of the transaction or arrangement cannot be ascertained, it will be deemed to exceed £50,000.
What is the amount that does not require shareholder approval for loans or quasi-loans and credit transaction?
Loans or quasi-loans to a director or, under s.200, a person connected to a director up to an aggregate amount of £10,000 can be given without the need for shareholder approval.
£15,000 for credit transactions.
What is the sanction for non-compliance of making a loan?
The director and the person connected to the director and any other director who authorised the transaction must account for any gain made directly or indirectly from the transaction and indemnify the company for any loss or damage resulting from the transaction.
What’s the defence for entering into an unauthorised transaction with a connected person?
The director will not be liable if he took all reasonable steps to ensure the company complied with those sections.
s.213(6)
s.213(7) for any connected person and any director that authorised the transaction who can show they had no knowledge of the circumstances constituting the contravention.
What is the general prohibition for a director’s action?
s.232 provides that a company cannot indemnify a director of the company or an associated company for any liability he may have incurred as a result of his negligence, default, breach of duty or trust in relation to the company of which he is a director.
Any provision purporting to do so is void.
What’s the effect of (qualifying third party indemnity provisions) QTPIP and where can you find it in the CA?
s. 234
A company can indemnify a director against liabilities incurred by the director to anyone other than the company or an associated company.
• the cost of defending those proceedings and the financial cost of an adverse judgement.
A director can still be liable to the company itself and cannot be indemnified against this.
What does qualifying pension scheme indemnity provision do and where can you find it in the CA?
s. 235
A provision which indemnifies a director of a company that is a trustee of an occupational pension scheme against liability incurred in connection with the company’s activities as a trustee of the scheme.
As a general rule, an OR is required to approve?
- any director’s service contract which is for a guaranteed period longer than 2 years
- any substantial property transaction.
- a loan to a director by a company
What additional restrictions are public companies and private companies associated with public companies subject to?
They cannot enter into quasi-loans, credit transactions or give guarantees or security to directors unless approved by OR.
What’s best practice in relation to disclosing conflict of interest?
177(5) & (6) are the exceptions where directors does not requires a declaration of an interest.
Although it would be best practice to disclose and have the disclosure documented in the board meeting minutes.
What happens if the procedure of ratifying a director’s wrongdoing is proposed as a written resolution?
s239(3)
The director and any shareholders connected to him are not eligible to take part.
The resolution need not be sent to them and they are not taken into account in determining whether the requisite majority has been achieved to pass the resolution.
What is the resolution requirement to ratify the conduct by a director negligent acts?
OR - unless the company’s articles require a higher majority (or unanimity).
Any votes which the director and any person connected to him may have as shareholders of the company cannot be taken into consideration.
It is not appropriate for those that have done wrong, or connected to them, to be able to vote to waive their own liability.
What is the requirement to ratify a director’s wrongdoing at a meeting?
s.239(4)
The necessary majority must be achieved disregarding any votes in favour made by the direct and any members connected to him.
The director and connected member can still attend, count in the quorum and take part in the proceedings at a meeting where such a resolution is proposed.
