Management, Administration and the Regulation of Companies Flashcards
How long are public company directors appointed for?
Public company directors are appointed for a period of 1 year before they must seek re-election, if they wish to be re-elected
Directors should be remunerated in part based on their performance as per the UK Corporate Governance Code.
True or False?
True.
How many members represent a quorum for a large public company’s general meeting?
The amount set out in the Articles of Association.
Is there an upper age limit for directors of private companies?
No
Is a director who is 70 disqualified from holding office as a director of a public company?
No, but the director must seek re-election every year after reaching 70
Who is responsible for calling or convening a general meeting of the members of a company?
Directors are responsible, but this duty is normally delegated to the company secretary
A special resolution requires how many days’ notice to be validly passed?
14 days, if it’s going to be passed at a general meetings
Under what circumstances can an annual general meeting be held at short notice?
Short notice must be approved by all members
How many days’ notice must be given for an annual general meeting?
21 days, unless otherwise stated in the Articles
How many days’ notice must be given for a general meeting?
14 days, unless otherwise stated in the Articles
Under what circumstances can a general meeting be held at short notice?
Short notice must be approved by 90% of members for a private company or 95% of members for a public company
If directors always act on the advice of the auditor, can the auditor be viewed as a shadow director?
No, a person acting in a professional capacity (accountant, auditor, legal advisor) cannot be classed as a shadow director
What is a shadow director?
A shadow director is a person, who though not officially appointed as a director, in accordance with whose instructions the directors are accustomed to act.
This includes disqualified directors,
In a private company, any resolution may be passed as a written resolution.
Is this statement true or false?
False, the removal of an auditor or a director cannot be passed as a written resolution.
Any other resolution can be passed as a written resolution.
Members have the right in a general meeting to determine the level of the auditors’ remuneration.
Is this statement true or false?
True, but generally, the members authorise the Board of Directors to negotiate the level remuneration.
The duties of the Company Secretary can only be performed by any director of the company.
Is this statement true or false?
False, the duties can also be performed by any person that the directors delegate those duties to.
This person need not be qualified.
What are the types of meeting that a company can call?
There are 3 types of meeting:
- Annual general meeting
- General meeting
- Class meeting
What are the general duties of a director, according to the Companies Act 2006?
A director has 6 general duties:
- to act per the company’s constitution
- to promote the success of the company (s 172 CA 2006)
- to show independent judgement
- to show reasonable skill, care and diligence (s 174 CA 2006)
- To avoid conflicts of interest (s 175 CA 2006)
- To not accept benefits from third parties (s 176 CA 2006)
To whom should full disclosure of interests in contracts and transactions of a company should be made by directors?
Directors must disclosure their interests in contracts and transactions to the entire Board of Directors at the first board meeting possible.
If this is not done, the contract will be voidable by the company and the director liable for the profits made.
What does ultra vires mean in the context of directors’ actions?
The phrase “ultra vires” is used to mean to act outside of one’s scope or one’s powers.
Directors should act with such degree of skill, care and diligence as could reasonably be expected from a person of that age, experience and qualification.
True or False?
True, as per s 174 CA 2006
Do directors have a fiduciary duty to avoid conflict of interest?
No, directors have a statutory duty to avoid conflicts of interest as per s 175 CA 2006.
Under what legislation can a court order the disqualification of a director under certain grounds?
The Company Director Disqualification Act (CDDA) 1986
What are the 3 categories of conduct under which a director can be disqualified?
- General company misconduct
- Insolvent companies and unfitness
- Other cases, such as participation in fraudulent or wrongful trading
Can a director who has recently self-declared bankruptcy continue in their office as a company director?
No, this is grounds for disqualification under CDDA 1986
Are private companies mandated to have annual general meetings?
No
Are public companies mandated to have annual general meetings?
Yes, they must have an AGM within 6 months of year end.
At the first AGM of a public company, all directors must retire and decide whether to seek re-election.
Is this statement true or false?
True
What consequences can a director face if they breach any of their duties?
Fined as a failure to comply can be a criminal offence
Removed from office for breach of their service contract
Told to indemnify the company for any losses suffered as a result of breach of duty
If an auditor or a firm of auditors seeks to resign, or does not want to be re-elected, what must they deliver to the company’s registered office?
The auditor must deliver either a statement of circumstances or a statement of no circumstances.
What kind of resolution does a company have to pass in order to change auditors?
An ordinary resolution with special notice.
What level of majority is needed to pass an ordinary resolution?
A simple majority or that of at least 50%
What level of majority is needed to pass a special resolution?
A majority of at least 75%
What can ordinary resolutions be used to do?
Some uses of ordinary resolutions include:
- Allotment of shares
- Approval of auditors’ liability
- The appointment and removal of directors and auditors (with special notice)
What can special resolutions be used to do?
Some uses of special resolutions include:
- Liquidations
- Change of the Articles
- Change of name
- Reduction of share capital
What kind of resolution does a company have to pass in order to remove a director from office?
An ordinary resolution with special notice
Under the UK Corporate Governance Code, the role of the Chairman and the Chief Executive Officer can be held by the same person.
Is this statement true or false?
False, the roles of Chairman and CEO must be split between 2 individuals
What is the statutory minimum amount of non-executive directors that should be appointed in a large public company?
The statutory minimum is ideally not less than 3 and at least as many non-executives as executives
What is the minimum number of directors required in a private company?
1
What is the minimum number of directors required in a public company?
2
What are the types of directors?
There are 7 types of directors:
1. De jure - formally appointed and registered
2. De facto - not formally appointed but carries out duties as if they are
3. Executive - a board member who manages the business
4. Non-executive - A board member who does not
manage the business
5. Alternate - A person who acts in place of another director
6. Shadow - A person who the board is used to following
7. Managing - This person has the implied authority to contract on behalf of the company
An auditor can be dismissed by ordinary resolution of usual notice.
Is this statement true or false?
False, the notice period is a special one of 28 days
Under the model constitution, a director is expected to leave office if, in the opinion of the other board members, the director is being disruptive and failing to perform the duties expected of him.
Is this statement true or false?
False
A written resolution for a private company is deemed to have been passed with effect at what date?
The date on which the required majority of all eligible votes voting in favour is reached
When is a public company expected to hold their annual general meeting?
Within 6 months of their year-end
Who is unable to be appointed as an auditor for a company as per the CA 2006?
An employee of the company
Directors must exercise their powers in the best interests of the members or the company as a whole?
The company as a whole
Does an auditor have the right to receive copies of any proposed written resolutions?
No.
A private company is required to have an auditor.
Is this statement true or false?
False.
