Directors Powers And Authority Flashcards
Decision required to change the office
Directors board resolution
How long is the old office address valid for
14 days after notice is filed with registrar
How to change office
Board resolution
Notify registrar within 14 days
Complete AD01
How to amend company constitution
S21 (1) CA 06- shareholders must pass special resolution
S283(1)- 75% vote
S30(1)- send amended articles to registrar of companies no later than 15 days after changes come into effect
Office to amend in conflict with mandatory provisions of CA
How to change accounting reference date
Simple majority of board of directors
If extended in past 5 years cannot do it again
Cannot extend before 18 months
Form AA01
No time limit
Last period onwards or current period onward
Appointment of company secretary
S270(1)- no essential Appointed with board resolution Form AP03 or AP04 if corporate Notify registrar in 14 days Keep register for inspection Directors may revoke secretary at any times and decide terms of pay Notify registrar of removal or resignation Form TM02 for removal or resignation
Appointment of director S154(1)
Every private company must have at least one director aged 16+, and is human
How to appoint a director
Shareholder ordinary resolution 50%
Keep register at office for inspection
Update register within 14 days
Form AP01 or AP02 if corporate
Don’t need board resolution to resign
S13 Company Directors Disqualification Act 1998
Offence to act if disqualified
What are directors responsible for? What can they do?
Directors are responsible for management of the company and can exercise all the company’s powers
How do directors exercise powers?
Through board resolutions at meetings
Directors act jointly
How to directors bind the company with third parties?
Through actual or apparent authority
What is actual authority?
Where the company gives the director specific consent for their actions. Can be express or implied.
What is apparent authority?
Director acts without consent of company but still binds company to third party based on representing the company
What if the director exceeds the actual or apparent authority?
Will not bind the company but liable to third party for breach
Indemnify the company for any loss
Account for profits
Accounting requirement under S394
Ensure full account provided annually
Accounting requirement S393(1)
Director shouldn’t approve the annual account unless satisfied that it provides a true and fair view of assets, liabilities, profits and loss of company
Requirement of S415
Directors report must be made
Must include review of business with risks, uncertainties and position of business (S417)
Failure to maintain records
S389
Failure to maintain records
2 years in prison
Torts
Tort by company- director not usually liable
Liable if they commit a tort separate from company
Or if they voluntarily take personal responsibility by creating special relationship between director and third party
Liable if director procures or induces company to commit tort where director acts beyond his role in company
Notice for board meeting
Appropriate and reasonable
Can be oral
Notice must specify date time place and nature of business
How many is the quorum
Two
Declaring an interest in a board meeting
S177 - declare if directly or indirectly interested either written or in board meeting
Give to other Directors at board meeting
State nature and extent of interest
S185- general interest in another company or connection with a person one declaration is enough, not every time.
Effect of declaring an interest
Depends on articles
Cannot vote
Effects quorum
Post meeting administration of special board resolution
Must be sent to ROC at CH within 15 days of being made or every officer is in default and liable
Post meeting admin for written board resolutions and decisions by unanimous consent
Must be sent to ROC at CH within 15 days of being made
Post meeting admin of minutes
S248- minutes must be recorded and kept for 10 years at company’s registered office
Can add delegate their powers to employees to make decisions within their job description
Yes MA5
What must board meeting notice include
No need to be written
Must include time date and place
When can a D not count on board meeting quorum
When decision regards an actual or proposed transaction or arrangement with the company in which D is interested
Can D vote and count in quorum for part of meeting only
Yes
How are votes counted in board meeting
1 D is 1 vote
Show of hands
What percentage is needed to pass a board resolution
Simple majority - over half of those in present must vote in favour
S177 interest of D
Cannot be disapplied
Where D has a personal interest in a proposed transaction or arrangement with the company they must declare nature and extent to board
Exceptions to s177 where D does not have to declare an interest
Not reasonably regarded as likely t give rise to conflict of interest
Or
To the extent Ds already know it
Or
If it concerns terms of service contract that has been or are to be considered by meeting of D
Does D need to use casting vote for a tie if they are against res
No only use it is in favour or res as without it in a tie it won’t be passed
Can a resolution be passed in writing or other form outside of meeting
Yes if unanimous
Fraudulent trading
In winding up it appears business was carried on with intent to defraud creditors of company or creditors of any other person
Need to show intent to defraud
Who brings fraudulent trading action
Liquidator or administrator
Consequences of fraudulent trading
If knowingly carrying on business in such a manner they may have to make contributors to company assets
What is misfeasance
Breach of fiduciary duty or any other duty
Consequences of misfeasance
Contribute to assets
Repair, restore or account for money or property misapplied
Elements of wrongful trading
In administration or liquidation
Knew or ought to know there was no reasonable prospect of avoiding insolvent liquidation
They were D at the time
Standard expect of D - wrongful trading
Standard of a reasonably diligent person having regard to
The general knowledge, skill and experience expected of a D (objective)
And
The skill knowledge and experience of that D (subjective)
Defence to wrongful trading
Took every step they ought to have taken to minimise loss to creditors
How are a breach of Ds duties enforceable / remedies
Same as for breach of fiduciary duty: Compensation Account of profits Recission Restoration of property Injunction
Remedy for breach of Ds duty to exercise all reasonable care skill and dilligence
Common law damages assessed in same way as negligence
Can a beach of Ds duty be ratified
Yes but D in question cannot vote on it
S182 CA 2006
Where D is directly or indirectly interested in a transaction must declare nature and extent to other Ds ASAP
Exceptions to duty under s182
If D is not aware of interest (taken as aware of matters he ought to reasonably be aware of)
Interest unlikely to give rise to conflict
Ds already know or ought to know
Concerns service contract
Differences between s182 duty and Ds duty to declare interest
Failure to declare is criminal offence under s182 but civil matter in Ds duties
Under s182 declaration must be made at meeting of Ds or by notice in writing sent to all other Ds or notice of interest at board meeting
Who can remove auditor
S
What must auditor do before leaving
Make statement about why they’re leaving
How long to register shares and issue certificate
2 months
What must an S register say if there is only one S
Must be a statement saying this on the register or criminal offence
Where to keep S register and who can inspect it
Keep at office or SAIL
S can inspect for free
Anyone else can inspect for a fee
Do you always have to keep a PSC register
Yes even if no one is on it
Can a PSC register be private
Yes can apply to keep it private
It will say how many PSC and how many shares they have but won’t say their names
Ways D can be liable in connection with office as D
Failure to file docs at CH - fine
Environmental leg
Breach of health and safety
Failure to maintain company records - fine or 2 years prison
Making political donations without approval
Bribery
Breach of responsibility regarding accounting records
How long can a Ds disqualification last
2-15 years
Grounds for disqualification of D
Fraud on winding up Breach of competition law Unfit D of insolvent company Conviction for an indictable offence Persistent breach of company leg Summary conviction for failure to file required notice or doc Investigation and finding of unfitness
Effect of a Ds disqualification order
Cannot be a D or in any way concerned with promotion, formation or management of a company without leave of court
Consequences of breach of Ds disqualification
Offence - 2 years imprisonment
D who is disqualified is personally liable for debts of company if involved in management while disqualified
Who do the restrictions regarding long term service contracts, payment for loss of office loans to D and substantial property transactions apply to
Ds and shadow Ds
What is a payment for loss of office
A payment to D when directorship ends
Includes when S is selling shares and the price is in excess of price other S could have obtained
Who approves a payment for loss of office
If £200 or more (unless D is legally entitled to it) will need ordinary S res
What payments to Ds require ordinary S res
Payment to past D
Payments to person connected to D
Payment to anyone at direction of or for benefit of a D or person connected to D
What if a payment to D is made without ordinary S res
It is held on trust for the company
D recieving it and D authorising it are jointly and severally liable to indemnify company for loss
Procedure to have a payment to D for loss of office authorised
Memo with details of payment must be at office for 15 days prior to GM or send with written res
Who approves a loan to D, holding company or security for such a loan
Ordinary S res
If D is also a D of holding company then it must also pass ordinary S res
What if a loan is given to D, holding company or security for such loan without an S res
Voidable at company’s discretion
Can be affirmed by company
D who loaned money and D who authorised it are jointly and severally liable to account for gain and indemnity company for loss
Procedure for getting a loan to D, holding company or security for such a loan
Memo setting out terms at office for 15 days prior to GM
Or send with written res
Exceptions to requirement for ordinary res for loan to D, holding company or security for such a loan
Expenditure for purposes of company or D performing duties (max 50k)
Expenditure on defending legal proceedings
Expenditure on defending investigation by regulatory authorities
Minor business transactions (max 10k)
What is a substantial property transaction
D or person connected to D buys or sells non cash asset to company worth £100k or £5 and 10% of company net asset value
Who authorises substantial property transaction
Ordinary S res
Who is a person connected to D
Family or company in which D or Ds relative owns 20%
Substantial property transaction exceptions that don’t need S res
Transactions between 2 wholly owned subsidiaries of the same holding company
Company is a wholly owned subsidiary of any other company
Transaction between company and a person in his character as a member of that company
Transaction between holding company and its wholly owned subsidiary
What if a substantial property transaction isn’t approved with S res
Voidable
Person with who company entered into arrangement and D who authorised it may have to account for gain or indemnity company
