Internal Disputes (SGSs 15,16)

Question 1

Model Article which sets out how a Director may be refused from office

Answer 1

MA 18

Question 2

A Director may be removed from office by an OR of the shareholders

Answer 2

s.168(1) CA 2006

Question 3

If board cooperate on removal of a director, they must call a board meeting using this power

Answer 3

MA 9

Question 4

If board cooperate on removal of a director, they must call a general meeting to pass the OR using this power

Answer 4

s.302 CA 2006

Question 5

The shareholders must give a ‘special notice’ of a resolution to remove a Director

Answer 5

s.168(2) CA 2006

Question 6

Special notice of intention to remove a Director must be given at least 28 days before the GM

Answer 6

s.312(1) CA 2006

[Clear days - s.360 CA 2006]

Question 7

Special notice must be given to other members in the same manner and at the same time as it gives notice of the meeting or 14 days before the GM via an advertisement in a newspaper

Answer 7

s.312(3) CA 2006

Question 8

Director being removed must be given notice too, so they have the right to speak against the removal at the meeting and to make written representations to the shareholders in advance of the meeting

Answer 8

s.169 CA 2006

Question 9

Written resolution procedure is not available for removal of a Director

Answer 9

s.288(2)(a) CA 2006

Question 10

If the shareholders vote to remove a Director, the company must inform the registrar of the remove within 14 days on form TM01

Answer 10

s.167 CA 2006

Question 11

If the shareholders vote to remove a Director, the company must update the register of Directors

Answer 11

s.162 CA 2006

Question 12

If the shareholders vote to remove a Director, the company must update the register of Directors residential addresses

Answer 12

s.165 CA 2006

Question 13

The company must keep a copy of the director’s service contract available for inspection for at least one year following termination

Answer 13

s.228(3) CA 2006

Question 14

Possible claims available to removed Directors

Answer 14

Wrongful dismissal
Unfair dismissal
Redundancy

Question 15

If the board do not wish to, they do not have to cooperate and call a GM

Answer 15

Pedley v Inland Waterways

Question 16

Shareholders can require an uncooperative board to call a GM

Answer 16

s.303 CA 2006

Question 17

A s.303 notice can be made by SHs representing 5% of the paid-up share capital

Answer 17

s.303(2)(a) CA 2006

Question 18

Following a s.303 notice, the Board are required to call a GM with the resolution on the agenda within 21 days of the notice, with the meeting held within 28 days of the notice

Answer 18

s.304(1) CA 2006

Question 19

If Board still refuse to call a GM in time after a s.303 notice, the SHs who made the request can call the GM themselves if more than half of them agree to do so

Answer 19

s.305(1) CA 2006

Question 20

If SH call their own GM, it must be held within three months of the s.303 notice

Answer 20

s.305(3) CA 2006

Question 21

Shareholders can reclaim from the Company reasonable expenses they incur in calling a GM due to the Board’s failure to do so

Answer 21

s.305(6) CA 2006

Question 22

If SH call their own GM, 14 clear days notice must be given

Answer 22

ss.305(4), 307(10) and 360 CA 2006

Question 23

Derivative claim - Any SH can claim on behalf of the Company, usually against a Director
[Company gets remedy]

Answer 23

s.260 CA 2006

Question 24

Derivative claim - SH needs courts approval to continue claims (two stage test)

Answer 24

s.261(1) CA 2006

Question 25

General position on restrictive covenants in service contracts

Answer 25

The court’s general position is that they will be void unless the employer can show that they go no further than is reasonably necessary to protect its legitimate business interests.

Question 26

Wrongful dismissal key features

Answer 26

1. Contractual claim
2. Can apply to executive or non-executive directors
3. Director can apply for damages equivalent to his notice period.
4. Time limit to apply is 3 months

Question 27

Unfair dismissal key features

Answer 27

1. Employee dismissed for unfair reason or using wrong procedure
2. Only applicable to executive directors
3. Director must have been employed by the company for at least 2 years.
4. To dismiss claim, company would need to show it had a fair reason for dismissal and the dismissal itself was fair (procedure used).

Question 28

Redundancy key features

Answer 28

1. Only applicable to executive directors
2. Employee must have worked there for at least 2 years (unless contract says otherwise)
3. This happens when the role is no longer required by the company

Question 29

Payment in lieu of notice (PILON)

Answer 29

Employer can pay employee and not require them to work

Question 30

Compensation for unfair dismissal

Answer 30

There is a basic award (calculated using a statutory formula) and a compensatory award based on the employee’s loss of earnings.

Question 31

Removal of Director who is also a SH

Answer 31

As they risked investment, they have legitimate expectation to be involved the Company’s management, and if small company, to be employed by the Company too

Question 32

Removal of Director who is also a SH - legitimate expectation

Answer 32

If court finds there is legitimate expectation, removal can be held by court to be unfairly prejudicial conduct under s.994(1) CA 2006.

Question 33

If the court finds that the removal is unfairly prejudicial conduct, it has discretion to make such orders as it thinks fit to provide relief

Answer 33

s.996(1) CA 2006

most commonly other SH or company to buy their shares - s.996(2)(e) CA 2006, for value decided by court

Question 34

Statute for requirements of a settlement

Answer 34

s.203 ERA 1996

[not in permitted materials so need to memorise]

Question 35

A company cannot make compensation payment without approval by OR

Answer 35

s.217 CA 2006

unless below £200 - s.221 CA 2006

Question 36

No approval required for compensation in relation to settlement of termination of office

Answer 36

s.220(1)(c) CA 2006