Internal Disputes (SGSs 15,16) Flashcards
Model Article which sets out how a Director may be refused from office
MA 18
A Director may be removed from office by an OR of the shareholders
s.168(1) CA 2006
If board cooperate on removal of a director, they must call a board meeting using this power
MA 9
If board cooperate on removal of a director, they must call a general meeting to pass the OR using this power
s.302 CA 2006
The shareholders must give a ‘special notice’ of a resolution to remove a Director
s.168(2) CA 2006
Special notice of intention to remove a Director must be given at least 28 days before the GM
s.312(1) CA 2006
[Clear days - s.360 CA 2006]
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
s.312(3) CA 2006
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
s.169 CA 2006
Written resolution procedure is not available for removal of a Director
s.288(2)(a) CA 2006
If the shareholders vote to remove a Director, the company must inform the registrar of the remove within 14 days on form TM01
s.167 CA 2006
If the shareholders vote to remove a Director, the company must update the register of Directors
s.162 CA 2006
If the shareholders vote to remove a Director, the company must update the register of Directors residential addresses
s.165 CA 2006
The company must keep a copy of the director’s service contract available for inspection for at least one year following termination
s.228(3) CA 2006
Possible claims available to removed Directors
Wrongful dismissal
Unfair dismissal
Redundancy
If the board do not wish to, they do not have to cooperate and call a GM
Pedley v Inland Waterways
Shareholders can require an uncooperative board to call a GM
s.303 CA 2006
A s.303 notice can be made by SHs representing 5% of the paid-up share capital
s.303(2)(a) CA 2006
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
s.304(1) CA 2006
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
s.305(1) CA 2006
If SH call their own GM, it must be held within three months of the s.303 notice
s.305(3) CA 2006
Shareholders can reclaim from the Company reasonable expenses they incur in calling a GM due to the Board’s failure to do so
s.305(6) CA 2006
If SH call their own GM, 14 clear days notice must be given
ss.305(4), 307(10) and 360 CA 2006
Derivative claim - Any SH can claim on behalf of the Company, usually against a Director
[Company gets remedy]
s.260 CA 2006
Derivative claim - SH needs courts approval to continue claims (two stage test)
s.261(1) CA 2006
General position on restrictive covenants in service contracts
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.
Wrongful dismissal key features
- Contractual claim
- Can apply to executive or non-executive directors
- Director can apply for damages equivalent to his notice period.
- Time limit to apply is 3 months
Unfair dismissal key features
- Employee dismissed for unfair reason or using wrong procedure
- Only applicable to executive directors
- Director must have been employed by the company for at least 2 years.
- To dismiss claim, company would need to show it had a fair reason for dismissal and the dismissal itself was fair (procedure used).
Redundancy key features
- Only applicable to executive directors
- Employee must have worked there for at least 2 years (unless contract says otherwise)
- This happens when the role is no longer required by the company
Payment in lieu of notice (PILON)
Employer can pay employee and not require them to work
Compensation for unfair dismissal
There is a basic award (calculated using a statutory formula) and a compensatory award based on the employee’s loss of earnings.
Removal of Director who is also a SH
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
Removal of Director who is also a SH - legitimate expectation
If court finds there is legitimate expectation, removal can be held by court to be unfairly prejudicial conduct under s.994(1) CA 2006.
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
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
Statute for requirements of a settlement
s.203 ERA 1996
[not in permitted materials so need to memorise]
A company cannot make compensation payment without approval by OR
s.217 CA 2006
unless below £200 - s.221 CA 2006
No approval required for compensation in relation to settlement of termination of office
s.220(1)(c) CA 2006